The momentum for prompt payment legislation is sweeping the country, with Ontario leading the way by making major changes to the Construction Lien Act to come fully into force in 2019. However, legislation can only do so much—contractors can only enjoy prompt payment if they can produce complete, accurate and timely invoices.
“In Ontario, it all starts with the prime contractor sending an invoice to the owner,” says Paul Olenik, account executive for Canada with Viewpoint Construction Software. “The owner must pay within 28 days or dispute that invoice within 14 days. Prime contractors must pay sub-contractors within seven days, and those sub-contractors must pay their sub-contractors within seven days as well. However, there’s a lot of responsibility placed on the prime contractor to trigger and enable this cash flow by preparing an accurate and defendable invoice.’”
According to the Ontario legislation, a “proper invoice” must include:
- The contractor’s name or address, date of the invoice, and period during which services or materials were supplied;
- Information identifying the authority, contract or otherwise, under which the services or material were supplied;
- A description, including quantity, where appropriate, of the services or materials supplied;
- The amount payable for services or materials supplied, and payment terms;
- The name, title, telephone number and mailing address of the person to whom payment is to be sent; and
- Any other additional information that may be prescribed by the specific terms of the contract.
“The clock starts ticking when the invoice is delivered,” says Olenik. “If it’s incomplete or the owner disputes the accuracy of the invoice, the clock is re-set. In many cases, contractors don’t have a handle on exactly how much time and material charges they need to include in the invoice at a particular date, or whether the project is even profitable for them. They either estimate or simply divide the estimated project cost into equal chunks and then try to play catch-up ball with unanticipated costs and charges in the final project invoice. Viewpoint Construction Software can assist contractors in producing invoices that are both timely and accurate. It can also help to generate that invoice faster, to get the prompt payment process started.”
Viewpoint begins that process by creating a system where employees find it easy to submit digital time sheets, record the movement and use of materials, document inspections and report on work completed using intuitive tools married to hand-held devices such as smart phones or tablets.
But that data needs to make the jump from project site to the accounting department without friction.
“It can be a huge time sink using traditional methods just trying to negotiate the internal process of putting that invoice together,” says Olenik. “Accounting is often trying to assemble supporting documents and the contracting team is trying to supply information manually on short notice.”
Using Viewpoint, accounting personnel can access previously created data to quickly generate a time and material invoice. They can also employ the same software to access the original contract, project file and payment schedule.
“You can support that invoice by attaching any sort of digital reference, from time sheet data and time card images, to purchase order information and images, material supplier invoices and change orders,” says Olenik. “That invoice and all of the supporting documentation is generated immediately, not added one piece at a time.”
Sub-contractors and their invoices are also listed and accessible, allowing Viewpoint users to meet their own prompt payment obligations within seven days of receiving payment.
Change orders represent a particular challenge at billing time. Olenik notes that contractors find it much easier to invoice for time and materials related to change orders in the next billing period, rather than surprising the owner by billing all change orders at the end of the project. Using Viewpoint, the authority to act on change orders is transparent, and the justification for the billing is attached.
“The transparency and accuracy of the invoice is the key to speeding up payment, regardless of whether your jurisdiction has enacted prompt payment legislation,” says Olenik. “The documentation attached to the invoice will support the invoice leaving very little room for questions from the company paying you. And providing consistently accurate invoices helps to build the credibility of your business over time.”
This content is sponsored by Viewpoint Construction Software in collaboration with ConstructConnect® Media. To learn more about Viewpoint, visit www.viewpoint.com.