Reducing the Risk-Weighted Price of Goods & Services in the Australian Construction Industry

Every invoice issued in the civil construction industry carries the risk of non-payment.

Even when the invoice is paid, chances are it has been involved in some sort of delay or perhaps dispute.

Whilst legislative measures have been introduced to at least tell the supplier of an intention to dispute or delay payment, this doesn’t solve the problem. In fact, these notifications are now being generated by contractors as an administrative necessity.

Chat to anyone that has been around the industry for a while, and they will recount stories of when subbies used to be paid on time and this act alone would make you a preferred contractor to work for. 

The tendency nowadays to use subcontractor payments as a source of working capital is adding hidden cost to the supply chain. This cost of disputes, delays and non-payment adds a risk weighting to every tonne of material or hour of work. And we are all paying for it.

In today’s market it is expensive credit. Against historically low interest rates, we stack up unnecessary processes, uncertainty of cash flow and large amounts of management time on both sides of the transaction. So, it follows that, if we can remove this uncertainty, streamline the processes, and eliminate the waste then this risk premium can be dramatically reduced.

And the source of more than 50% of these issues, according to a major construction materials supplier, is docket disputes. Unsigned, inaccurate, or entirely lost, these anachronistic transaction records drive as much as 1% of the cost of all construction supply chain activities. With error rates as high as 8-10%, paper dockets just cannot provide a solid foundation for an effective on-time payment process.

I’m not suggesting ‘instant’ payment is the answer. Instead, cash positions should be managed through well-structured contracts and payments made with in line with those contracts supported by an unequivocal proof of work process. 

The solution lies in the online, many-to-many exchange of docket data through an independent docket exchange. Independence is important. Trust in construction is there, until it’s not. An independent platform provides transparent verification (to both parties), indelible records, audit logging and issue resolution. Any issues that might result in a payment delay are resolved long before the invoice is due, facilitating the process of on-time payment.

Some companies have started investing in digitally transforming their docket process, however, they rarely address the critical requirement for cross company data exchange. Suppliers have many customers, and contractors have many suppliers. Each party implementing their own siloed solution will drive a mess of stove pipes that are slow to develop, expensive to maintain and difficult to manage.

A common platform will reduce the cost and extend the reach of B2B data exchange. Integrate once to such a solution and you can digitally enable the entire supply chain – upstream or downstream, including the ‘mum and dad’ businesses that are the heart and soul of our industry.

We are working with some of the biggest names in construction to deliver what I believe could be one of the most transformative developments in the Australian construction industry. Digital Transformation for the entire industry, from grass roots to the enterprise.

If you’d like to learn more about the Docketbook solution, get in touch with me directly or reach out to our team at info@docketbook.com.au.