Conducting payment in the construction industry is a lot different than in others. Firstly, there must be a construction contract between the contractor and its client. Then payment is made progressively, in order to aid the contractor’s cash flow, otherwise paying in full after the work is completed will lead to financial difficulties for the contractor.

Progressive payment refers to paying the contractor according to the work completed, either on a monthly basis or between the agreed duration. Therefore, in order to receive payment from the client, the contractor has to initiate the progress claim process.

There are several stipulations or requirements involved in this claims process. Both parties will have to agree to a set date for the contractor to submit their progress claim, which usually falls on the 25th of the month. Suppose the contractor fails to submit their progress claim by the date stipulated, then they will run into the risk that the claim will not be processed until the following month.

There are several contracts in which the progress claim is used, such as when the contract is entered between:

• An employer/client and a main contractor

• A main contractor and a nominated subcontractor (NSC)

• A main contractor and subcontractor (domestic)

Each of these contracts have its own process that must be handled carefully.

Contract 1: Between an employer and a main contractor

1. Generally, the contractor will prepare his progress claim and submit it to the architect. It’s also a common practice for the employer to receive a copy.

2. The architect will then verify the work completed during the particular month and issue an interim certificate to the employer, along with a copy to the contractor.

3. The contractor then submits their tax invoice, attached with the interim certificate (for accounting purpose), to the employer for the amount stipulated on the interim certificate.

4. Upon receiving the contractor’s invoice, the employer will make the payment.

Contract 2: Between a main contractor and a nominated subcontractor (NSC)

1. The NSC will prepare his progress claim and submit it to the main contractor.

2. The main contractor will compile the NSC’s claim and submit it as part of the main contractor’s claim to the architect.

3. The architect will verify the work completed by the NSC during the particular month and issue an interim certificate to the employer with a copy to the main contractor.

4. The interim certificate is then forwarded to the NSC.

5. The NSC submits their tax invoice, attached with the interim certificate (for accounting purposes), to the main contractor for the amount stipulated on the interim certificate.

6. Upon receiving the NSC’s invoice, the main contractor will then make payment to the NSC.

Compared to the contract between the employer and main contractor, the nominated subcontractor will be the one to initiate the progress claim, and the main contractor will issue the payment. The NSC does not directly claim from the employer.

Compared to the domestic subcontractor, the nominated subcontractor (NSC) enjoys certain privileges. They are selected by the client to carry out some of the works. Moreover, the NSC also gets their progress claim certified by the architect, which is not practiced for the domestic subcontractor.

Contract 3: Between a main contractor and a subcontractor

1. The subcontractor will prepare his progress claim and submit it to the main contractor.

2. The main contractor will certify the subcontractor’s completed work, usually in accordance to the interim certificate the main contractor has received from the architect.

3. The main contractor will then send the interim certificate to the subcontractor.

4. The subcontractor submits their tax invoice, attached with the interim certificate (for accounting purposes), to the main contractor for the amount stipulated on the interim certificate.

5. Upon receiving the subcontractor’s invoice, the main contractor will then make the payment to the subcontractor.

In summary, there are subtleties among these contracts that must be monitored carefully.

The entire progress claim, interim certificate issuance and payment process will affect the cash flow in a construction company, and thus should be tracked properly.

Nevertheless, when a construction company handles a lot of projects, the team overseeing may overlook or delay the progress claim submission, which will impact the certification process. Other times, it can take the architect a long time to issue an interim certificate, which will subsequently delay the processes that follow.

Generally, there are many points of failure or delay in the progress claim process, which makes it even more important to monitor progress claims closely. This also highlights the need for a centralised payment platform, such as Speedbrick ECHO, where your team can obtain clean and simplified visualisations of the progress claims, which provides a clearer overview to all stakeholders.

Speedbrick ECHO enables you to track each project’s financial health at a glance, monitor claimed and certified progress to identify outstanding payments, and automatically generate project cash inflow reports.

There are many benefits to Speedbrick ECHO, as using this platform allows you to:

• Recognise payment risks early

• Drill down to the details of the payment

• Identify and manage potential cost overrun scenarios before they happen

• Reduce unnecessary effort and time spent processing financial information for reports

Here’s what our client said about Speedbrick ECHO:

It is so easy, I use Speedbrick to monitor all my projects’ payments. The system highlights outstanding payment for my immediate action. Now, I only need to focus on chasing outstanding payment. I no longer spend time compiling spreadsheet reports.

– Vivan, credit controller of Strong Force (M) Sdn Bhd

On the other hand, to manage your subcontractors and your payment to them, Speedbrick offers the Speedbrick ECHO+.

With Speedbrick ECHO+, you can do the following (and more!):

• Supervise and track awarded, certified, and paid subcontractors on one platform

• Maintain a directory of subcontractors

• Create and issue standardised subcon certificate summaries

• Approve, certify and pay subcon variation orders (VOs) in a central platform

• Generate and link backcharges to subcon certificates

With these features, Speedbrick ECHO+ enables you to make better decisions based on real-time insights of subcontractor performance, as well as to manage your subcons easily on a single platform.