Late Payments Aren’t a Cash Flow Problem, They’re a Process Problem

Introduction

Late payments are one of the most common complaints we hear from construction and engineering business owners. Customers pay late. Cash feels tight. Directors assume it’s just part of the industry.

At Jones Financial Accounts (JFA), we see this differently. In most cases, late payments are not a customer problem or a cash flow problem, they’re a process problem.

When invoicing, ownership, and follow-up are unclear, cash gets stuck. When processes are tight, transparent, and consistent, collections improve quickly, often without changing customers at all.

This blog explains why late payments persist, why small and fast-growing businesses feel the impact more sharply, and how better processes dramatically improve collections.

Late Payments Aren’t a Cash Flow Problem, They’re a Process Problem

Cash flow is the outcome. Process is the cause.

In construction and engineering, late payments usually stem from:

• Invoices raised late

• Invoices raised incorrectly

• No clear ownership of credit control

• No follow-up structure

Blaming customers is easy. Fixing the process is far more effective.

Many SMEs assume that improving cash flow means increasing sales or taking on finance.

In reality, collecting existing invoices faster often delivers a quicker and cheaper result.

Why This Hits Growing Construction Businesses Hardest

Smaller and fast-scaling businesses typically have:

• Limited cash buffers

• High weekly wage and subcontractor commitments

• VAT liabilities that don’t wait for customer payments

If £30,000 of invoices are paid 30 days late, the business still has to fund:

• Payroll

• Suppliers

• Tax

This forces directors into firefighting mode, chasing cash instead of managing growth.

Common Process Failures That Cause Late Payments

From a CFO perspective, late payments are usually predictable.

Invoices Raised Too Late

Work is completed, but invoicing happens weeks later. This immediately delays payment and weakens the business’s position.

Errors and Missing Information

Incorrect rates, missing purchase orders, or lack of backup give customers a reason to delay.

No Clear Ownership

When “everyone” is responsible for chasing payments, no one actually does it.

Inconsistent Follow-Up

Customers are chased sporadically, not systematically. This signals that late payment is acceptable.

These are process failures, not bad customers.

Real Construction Example: Fixing Process, Not Customers

We supported a construction business turning over £1.8m with persistent late payments. Average debtor days were over 60.

No customers were changed.

Instead, we:

• Set a rule to invoice within five days of job completion

• Assigned one person full ownership of credit control

• Introduced a weekly aged debtor review

Within three months:

• Debtor days reduced to under 35

• Cash flow stabilised

• The business avoided using its overdraft

The improvement came entirely from process discipline.

Why Transparency Changes Behaviour

Customers respond to clarity.

When:

• Invoices are accurate

• Statements are sent regularly

• Follow-ups are consistent

Payment behaviour improves. Customers prioritise suppliers who are organised and professional.

This is why credit control should never feel aggressive. It should feel routine.

For a broader view of cash flow discipline, see:https://www.jonesfa.co.uk/blog/why-every-small-business-should-have-a-monthly-finance-health-check

The CFO View: Credit Control Is a Control System

From a leadership perspective, credit control is about risk management.

Strong processes:

• Reduce reliance on overdrafts

• Improve forecasting accuracy

• Protect supplier relationships

Weak processes create hidden risk that only shows up when cash runs out.

This is why late payments should be reviewed monthly alongside sales and costs, not treated as a separate admin task.

Myths That Keep Payments Late

“Our customers just pay late.” Often untrue. They pay disorganised suppliers last.

“Chasing damages relationships.” Silence damages relationships more than clarity.

“It’s not worth chasing small balances.” Small balances accumulate into big problems.

Practical Steps You Can Implement Now

1. Set a clear invoicing timeline (e.g. within five days of completion)

2. Assign one owner for all debtor collections

3. Review aged debt weekly, not monthly

4. Escalate overdue balances automatically

Helpful resources:

• Cash flow templates and guides: https://www.jonesfa.co.uk/resources

• Credit control insights: https://www.jonesfa.co.uk/blog

Why This Matters Specifically in Construction

Construction businesses operate on thin margins with high cash demands. Late payments restrict:

• Ability to negotiate supplier terms

• Capacity to invest in growth

• Confidence in forecasting

Fixing credit control processes is one of the fastest ways to improve financial stability without increasing turnover.

Key Takeaways

• Late payments are usually caused by weak processes

• Clear ownership improves collections quickly

• Faster invoicing shortens payment cycles

• Process discipline protects cash and confidence

If your business is busy but cash feels permanently tight, the issue is often how money is collected — not how much is earned. JFA helps construction and engineering businesses build credit control processes that improve cash flow without damaging relationships.

Wrapping up today's insights, tomorrow we simplify another accounting challenge.