Over 96 per cent of service companies reported that they were affected by late payments and that they had receivables in excess of 60 days, according to a survey of contractors and service companies conducted by the Energy Chamber of Trinidad and Tobago. In addition, 58 per cent of respondents said that the impact on their companies was very significant.
Companies said that the reasons for late payments included delays in receiving paperwork (such as a purchase order) (67 per cent), delays in receiving sign-off on completed jobs (67 per cent), delays due to staff turnover in customer companies (44 per cent), invoice-related queries (39 per cent), and lastly delays in receiving references from customers (17 per cent).
When asked about the types of organisations that were mainly making late payments, contractors indicated that issues were faced with state companies (68 per cent) and 45 per cent identified multinational organisations. Twentyseven per cent identified local privately owned companies as making late payments.
Sixty-five per cent of the surveyed contractors said that they had to make provisions in their accounts to write off doubtful debts. Seventy-three per cent of contractors also said that the problems with late payments have gotten worse over time. Twenty-three per cent said that the situation remained the same with no change, and only five per cent said that it had improved.
According to survey results 82 per cent of service companies said that a significant portion of management time is spent on dealing with late payment issues and 14 per cent said that most of their time is spent on dealing with the issue.
Late payments continue to place contractors and their customers in difficult and tense situations. When asked how the issue had impacted their relationship with their clients, one company said this has led to lost business because of the additional finance cost and the credit risk. Another company indicated that this has created huge gaps in relationships, and in more recent time, legal action was taken. Other respondents indicated that they were now very cautious of accepting contracts and engaging with certain clients, especially state companies.
To reduce the incidence of late payments, companies said they have taken all the measures possible, especially as it relates to timely submission of invoicing packages. Some companies also said they now require larger deposits and have implemented milestone payments.
It is clear that the issue of late payments continues to be a major concern for many service companies and contractors in the energy sector. This becomes even more burdensome in a challenging economic environment when services companies are struggling to stay afloat. It places contractors in a difficult position since they want to ensure that they continue getting work but also need to balance their cash flows.