We work with a lot of building contractors operating small and medium sized businesses, and many of them are now using Xero.
We hear it is really helping them to run their businesses. They can access it out on site (the joys of cloud based accounting) and can invoice directly from the Xero software without having to drive to an office. They actually don’t even need an office.
While Xero sends out documents stating “Tax Invoice” it doesn’t send them out stating “Payment Claim”, and it doesn’t send them out with the correct conditions attached.
To legally ensure payment, contractor invoices need to state this as per the Construction Contracts Act 2002. The act was created to help contractors and their clients understand the correct price, dispute bills, and collect debts, and debt collection is unfortunately a perennial problem in the construction sector.
We have done a little tinkering with the Xero invoice template to include the correct legal requirements, and make sure all building contractors and other businesses can comply with the Construction Contracts Act. This also means they don’t have to mess around too much with their invoicing procedure.
If you think we can help you to set up your payment claims and payment schedules in Xero, give us a call on 0800 755 333, or send us an email.
Also, check out this Xero infographic detailing some great Xero invoicing/payment facts.
A little more about the Construction Contracts Act 2002
The Construction Contracts Act 2002 was introduced to make it easier for construction contractors and their clients to understand and pay the contract price. This is of benefit to the client as they know what and when to pay, and what to do if they dispute the bill but it also, significantly, makes it easier for the construction sector to collect their debts.
Debt collection is an unwelcome part of any business but particularly so in the construction sector where non payment is a perennial problem.
The Construction Contracts Act 2002 covers the following areas:
- The construction, installation, alteration, repair, restoration, maintenance, extension, demolition, removal, or dismantling of any building or other structure.
- Putting in roadways, pipelines, water mains, sewers, electricity, water, gas, or telephone reticulation.
- Work done on any heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, security, and communications systems.
- Any cleaning work carried out as part of the construction work.
- Preparation for construction work such as site clearance, earth-moving, excavation, laying foundations; scaffolding.
- Site restoration and landscaping, painting and decorating.
Contact us if you would like us to help you with your subcontractor claim procedure.