A lot of subcontractors in the building sector are victims of a practice known as ‘Subbie Bashing’. The effect on them is normally cashflow problems and sometimes even means they are forced out of business.
If you are in that situation, contact us on 0161 907 4044 or [email protected] for your free advice on what to do now.
Subbie bashing is typically where large firms use their size and considerable resources to effectively ‘bully’ small subcontractors who are working for them – e.g. by the practice of delaying payments. The large firm knows that the subbie won’t be able to fight the issue because they don’t have enough resources at their disposal and they are hoping for more work from the large firm.
The situation can be extremely tough for subcontractors with tight margins who can quickly end up losing money on a project and find themselves in financial trouble.
How big is the issue?
It is thought that Small and Medium-sized Enterprises (SMEs) across the UK are owed more than £50 billion in late payments. However, they are reluctant to chase their slow-paying customers for fear of losing out on future business. It is a Catch-22 situation. Only a small sample of UK SMEs make use of the Late Payment of Commercial Debt Act which allows you to charge interest if another business is late paying for goods or services.
We previously outlined how to deal with unpaid invoices during the festive period, but it can be hard when it occurs throughout the course of the year.
What forms does subbie bashing take?
There are different way that contractors can withhold payments. These include:
- undervaluing payment certificates
- withholding retention monies
- creating false damages claims
- refusing final payments
- invoking harsh contract terms.
What can be done?
Often these contractors are operating illegally and there are steps you can take to recover your losses as a subcontractor, depending on the circumstances.
If you are owed more than £5,000 you can present a winding up petition. This would cause them some inconvenience and increase your chances of getting your money back.
You can get a Licensed Insolvency Practitioner, such as ourselves, appointed as a liquidator to act on your behalf and reclaim your owed money. This gives us the full weight of the law behind us to rigorously look into your debtor’s affairs.
How to sort out your company’s cashflow problems
We help a lot of owners of companies in the construction sector who have serious cashflow problems. The best option normally is for their limited company is to enter a process called a Creditors’ Voluntary Liquidation (CVL).
With a CVL:
- your limited company will close down (i.e. go into liquidation)
- your business debts will be dealt with
- your legal obligations as a director will be met; and
- you can then have a new, fresh start.
The cost of a CVL with Clarke Bell is just £1,995 (including VAT and the required disbursements).
A CVL is not necessarily the best option for everyone. So, contact us and we can discuss your situation and recommend the best solution for you. (That advice is free.)