In a recent survey undertaken by the Energy Chamber of Trinidad and Tobago (Energy Chamber), it was revealed that late payments for work completed continues to occur. The respondents were all energy services companies that are currently engaged in work in the sector. Over 94 per cent of respondents reported that they have significant or very significant financial impacts due to late payments. In addition, almost 70 per cent of companies have reported that the situation has been getting worse over the last three years.
Late payments in this instance refer to outstanding invoices that are 60 days or more overdue. On average, companies have indicated that they have more than 60 per cent of their receivables as 60 days or more late.
Seventy-four per cent of respondents to the survey said that the reason for late payments was due to delays in receiving sign-off on completed jobs. Sixty per cent also indicated that delays in receiving paperwork such as purchase orders were a major contributing factor. Thirty-seven per cent said that invoice-related queries were another reason. Other factors included delays due to staff turnover at the client company (23 per cent) and delays in receiving references from customers (13 per cent).
Most respondents have reported that local privately owned companies (58 per cent) are the clients that are mainly making late payments. Approximately 52 per cent selected state-owned enterprises, 39 per cent were multinational firms and a minority of 15 per cent said that Engineering, Procurement and Construction (EPC) contractors were responsible for late payments.
Companies have also reported that addressing the problems dealing with late payments takes up a significant amount of management time. Seventyfive per cent of respondents said that it takes up a significant amount of management time, while 18 per cent of companies said that it takes up most of management’s time. Only six per cent of respondents indicated that it does not take up much management time to deal with the issue.
Companies were asked how late payments affected the relationships with the client. The responses were quite varied; in some instances where respondents indicated worsening relationships, the companies refuse additional work until accounts are brought up-to-date and in some extreme cases, there were threats of legal action.
Some companies that reported limited impact on the relationship have indicated that they do so to maintain the relationship as it is still a source of revenue, and because of the fear that they do not get future work from the client.
It was also asked what measures were taken to reduce the occurrence of late payments. Companies have said that they increased communication with clients and engaged in constant dialogue, and are open to payment plans.
Some companies have also indicated that they ask that they get approved purchase orders before they begin work and others ask for part or full payment before the job is completed. In some instances, companies have reported that they simply stop doing work for the client.