The tendering and negotiation process is misunderstood by subcontractors and Rudi Klein.

The payment period is basically a matter of the cost of financing the period awaiting payment and only applies to costs incurred and paid. It’s a simple matter to calculate the cost for both a 30-day period and the 65-day period and include the higher figure in the tender and offer a discount of the difference for a 30-day payment period.

Cash flow can also be dealt with, or even improved from the 30-day situation, by factoring invoices to enable the sub-contractor to receive their money shortly after billing. The factoring charge can be built into the price and they will offer deals that differ on the basis of whether the invoice factored is for payment in 30 or 65 days so the subcontractor can still offer a discount to the main contractor.

Many of these extended payment periods are accountant driven. (The theory is that the longer they hold on to payment the more interest they make or the less they have to pay). By offering a discount it is amazing how easily the accountants can be overruled and a way to pay in 30 days or less can be found.

David A Roberts back to the future

Midas (CM, October, ) could have been even smarter if someone had not torn off day 33 before day 32 on the calendar pictured.

David Yeo

Source

Construction Manager