Payment chain - Revision history

Designing Buildings at 07:25, 6 March 2021

2021-03-06T07:25:40Z

← Older revision		Revision as of 07:25, 6 March 2021
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	* Supply chains in construction.		* Supply chains in construction.

−	[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Procurement]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Procurement]]

Designing Buildings at 08:57, 11 August 2020

2020-08-11T08:57:41Z

← Older revision		Revision as of 08:57, 11 August 2020
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	Suppliers have the right to suspend work for non-payment or to suspend part of the works and to claim costs and expenses incurred and extension of time resulting from the suspension.		Suppliers have the right to suspend work for non-payment or to suspend part of the works and to claim costs and expenses incurred and extension of time resulting from the suspension.
		+
		+	See also: Down payment chain.

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

	* Advance payment.		* Advance payment.
		+	* Down payment chain.
	* Ex gratis payment.		* Ex gratis payment.
	* Fair payment practices for construction.		* Fair payment practices for construction.

Designing Buildings at 08:47, 11 August 2020

2020-08-11T08:47:43Z

← Older revision		Revision as of 08:47, 11 August 2020
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	[[File:Paid.png\|link=File:Paid.png]]		[[File:Paid.png\|link=File:Paid.png]]
−
−	~~= Introduction =~~

	In the construction industry, payment can be the source of a great deal of controversy. Not only are the sums involved very large, and the duration of projects very long, but the total amount payable tends to change over time. In addition, contractors, subcontractors and suppliers face considerable risk when pricing construction projects, and optimistic pricing or late payments can quickly cause cash flow problems.		In the construction industry, payment can be the source of a great deal of controversy. Not only are the sums involved very large, and the duration of projects very long, but the total amount payable tends to change over time. In addition, contractors, subcontractors and suppliers face considerable risk when pricing construction projects, and optimistic pricing or late payments can quickly cause cash flow problems.
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	As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.		As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.

−	The supply chain is the interconnected hierarchy of supply contracts necessary to procure a built asset. On large or complex projects, responsibility and performance generally cascades down the supply chain to a plethora of suppliers sometimes unknown to management at the top of the chain.#	+	The supply chain is the interconnected hierarchy of supply contracts necessary to procure a built asset. On large or complex projects, responsibility and performance generally cascades down the supply chain to a plethora of suppliers sometimes unknown to management at the top of the chain.

−	The payment chain refers to the accounting practices adopted during these long-term and sometimes difficult construction projects ~~whereby~~ payments filter down through the chain of contracts.	+	The payment chain refers to the accounting practices adopted during these long-term and sometimes difficult construction projects to allow payments to filter down through the chain of contracts.

−	This extended chain can cause cash flow problems as on supplier may struggle to pay a next supplier in the chain until they themselves have been paid. In the past this resulted in 'pay when paid' provisions, that meant those at the bottom of the chain could wait many months before being paid for works they had undertaken.	+	This extended chain can cause cash flow problems as one supplier may struggle to pay the next supplier in the chain until they themselves have been paid. In the past this resulted in 'pay when paid' provisions, that meant those at the bottom of the chain could wait many months before being paid for works they had undertaken.

−	However, the Housing Grants, Construction and Regeneration Act ~~includes~~ provisions to ensure that payments are made regularly and promptly throughout the supply chain. This includes disallowing pay when paid clauses.	+	However, the Housing Grants, Construction and Regeneration Act 1996 included provisions to ensure that payments are made regularly and promptly throughout the supply chain. This includes disallowing pay when paid clauses.

−	In addition, pay when certified clauses are no longer allowed, and the release of retention cannot be prevented by conditions within another contract. So for example work contractors on a management contract project must have half of their retention released when their part of the works reach practical completion, not when the project as a whole reaches practical completion~~. This also applies to trade contractors on construction management contracts~~.	+	In addition, 'pay when certified' clauses are no longer allowed, and the release of retention cannot be prevented by conditions within another contract. So for example work contractors on a management contract project must have half of their retention released when their part of the works reach practical completion, not when the project as a whole reaches practical completion.

	Suppliers have the right to suspend work for non-payment or to suspend part of the works and to claim costs and expenses incurred and extension of time resulting from the suspension.		Suppliers have the right to suspend work for non-payment or to suspend part of the works and to claim costs and expenses incurred and extension of time resulting from the suspension.

Designing Buildings: moved Down payment chain to Payment chain over redirect

2020-08-11T08:44:27Z

moved Down payment chain to Payment chain over redirect

← Older revision

Revision as of 08:44, 11 August 2020

Designing Buildings at 08:44, 11 August 2020

2020-08-11T08:44:10Z

← Older revision		Revision as of 08:44, 11 August 2020
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	As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.		As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.

−	~~A down payment~~ chain is ~~a method~~ of ~~organising accounting activities associated with payments as they relate~~ to a ~~contractual agreement~~.	+	The supply chain is the interconnected hierarchy of supply contracts necessary to procure a built asset. On large or complex projects, responsibility and performance generally cascades down the supply chain to a plethora of suppliers sometimes unknown to management at the top of the chain.#

−	~~A down~~ payment~~, which is sometimes referred~~ to ~~as an advance payment, or ex gratis payment, is when part of a contractual sum is paid in advance of~~ the ~~exchange, i.e. before any work has been done or goods supplied. Down~~ payments ~~are typically recorded as prepaid expenses by~~ the ~~payer and recorded as assets on the balance sheet~~.	+	The payment chain refers to the accounting practices adopted during these long-term and sometimes difficult construction projects whereby payments filter down through the chain of contracts.

−	~~An ex gratis payment~~ can ~~be made, usually~~ on a ~~one time basis, with~~ the ~~client's agreement~~. ~~It is made~~ in ~~advance~~ of the ~~normal payment procedure. This may be to ensure certain~~ works ~~are carried on or to recover or prevent a delay or to expedite certain materials. This might be accompanied by an advance payment bond~~.	+	This extended chain can cause cash flow problems as on supplier may struggle to pay a next supplier in the chain until they themselves have been paid. In the past this resulted in 'pay when paid' provisions, that meant those at the bottom of the chain could wait many months before being paid for works they had undertaken.

−	~~On a construction project~~, ~~a contractor may request an advance payment~~ to ~~help them meet significant start up or procurement costs~~ that ~~may have to be incurred before construction begins~~.	+	However, the Housing Grants, Construction and Regeneration Act includes provisions to ensure that payments are made regularly and promptly throughout the supply chain. This includes disallowing pay when paid clauses.

−	~~= Purpose =~~	+	In addition, pay when certified clauses are no longer allowed, and the release of retention cannot be prevented by conditions within another contract. So for example work contractors on a management contract project must have half of their retention released when their part of the works reach practical completion, not when the project as a whole reaches practical completion. This also applies to trade contractors on construction management contracts.

−	The purpose of a down payment chain is to manage accounting practices during these long-term and sometimes difficult construction projects. This documented sequence of actions provides a framework that supports various reimbursement approaches - with different suppliers, subcontractors and providers - to different aspects of the project.	+	Suppliers have the right to suspend work for non-payment or to suspend part of the works and to claim costs and expenses incurred and extension of time resulting from the suspension.
−		+
−	A down payment chain documents multiple transactions to help organisations monitor costs through a series of partial invoices. When the job is completed, a final invoice is prepared to reflect adjustments that have ~~been made during~~ the ~~process.~~	+
−		+
−	~~In terms of accounting efficiencies, down payment chains are designed~~ to ~~accomplish the following:~~	+
−		+
−	* Make data entry more efficient.	+
−	* Improve data processing.	+
−	* Clarify budgetary benchmarks.	+
−	* Control activities around long-~~term accounting tasks~~	+
−		+
−	~~= Types of down~~ payment ~~chains =~~	+
−		+
−	~~There are two types~~ of ~~down payment chains: debit side or credit side.~~	+
−		+
−	~~Debit and credit side down payment chains are both constructed in~~ the ~~same manner. The only difference between the two is the incoming or outgoing payment data, which dictates whether the chain is debit or credit side.~~	+
−		+
−	~~== Debit side down payment chain ==~~	+
−		+
−	~~The debit side down payment chain is suitable for transactions with customers. This can include invoice processing~~ and ~~transaction payments. It is designed~~ to ~~track receivables owed to customers along with corresponding incoming payments. It can also be used to gain insight into past~~ and ~~future payments.~~	+
−		+
−	~~== Credit side down payment chain ==~~	+
−		+
−	~~The credit side down payment chain is suitable for transactions with vendors~~ and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side down payments, it can also be used to gain insight into past and future payments.	+
−		+
−	~~= Payment process =~~	+
−		+
−	~~The Housing Grants, Construction and Regeneration Act includes provisions to ensure that payments are made regularly and promptly throughout~~ the ~~supply chain~~.	+

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

Editor at 09:42, 9 July 2020

2020-07-09T09:42:20Z

← Older revision		Revision as of 09:42, 9 July 2020
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	== Credit side down payment chain ==		== Credit side down payment chain ==

−	The credit side down payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.	+	The credit side down payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side down payments, it can also be used to gain insight into past and future payments.

	= Payment process =		= Payment process =

Editor at 09:34, 9 July 2020

2020-07-09T09:34:27Z

Editor: moved Payment chain to Down payment chain

2020-07-09T09:31:50Z

moved Payment chain to Down payment chain

← Older revision

Revision as of 09:31, 9 July 2020

Designing Buildings at 09:16, 9 July 2020

2020-07-09T09:16:50Z

← Older revision		Revision as of 09:16, 9 July 2020
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	= Introduction =		= Introduction =
		+
		+	In the construction industry, payment can be the source of a great deal of controversy. Not only are the sums involved very large, and the duration of projects very long, but the total amount payable tends to change over time. In addition, contractors, subcontractors and suppliers face considerable risk when pricing construction projects, and optimistic pricing or late payments can quickly cause cash flow problems.
		+
		+	As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.

	A payment chain (or down payment chain) is a method of organising accounting activities associated with payments as they relate to a contractual agreement.		A payment chain (or down payment chain) is a method of organising accounting activities associated with payments as they relate to a contractual agreement.
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	A down payment, which is sometimes referred to as an advance payment, or ex gratis payment, is when part of a contractual sum is paid in advance of the exchange, i.e. before any work has been done or goods supplied. Down payments are typically recorded as prepaid expenses by the payer and recorded as assets on the balance sheet.		A down payment, which is sometimes referred to as an advance payment, or ex gratis payment, is when part of a contractual sum is paid in advance of the exchange, i.e. before any work has been done or goods supplied. Down payments are typically recorded as prepaid expenses by the payer and recorded as assets on the balance sheet.

−	An ex gratis payment can be ~~a type of payment chain~~ made, usually on a one time basis, with the client's agreement. It is made in advance of the normal payment procedure. This is to ensure certain works are carried on or to recover or prevent a delay or to expedite certain materials. This might be accompanied by an advance payment bond.	+	An ex gratis payment can be made, usually on a one time basis, with the client's agreement. It is made in advance of the normal payment procedure. This may be to ensure certain works are carried on or to recover or prevent a delay or to expedite certain materials. This might be accompanied by an advance payment bond.

	On a construction project, a contractor may request an advance payment to help them meet significant start up or procurement costs that may have to be incurred before construction begins.		On a construction project, a contractor may request an advance payment to help them meet significant start up or procurement costs that may have to be incurred before construction begins.
−
−	~~= Construction industry =~~
−
−	In the construction industry, payment can be the source of a great deal of controversy. Not only are the sums involved very large, and the duration of projects very long, but the total amount payable tends to change over time. In addition, contractors, subcontractors and suppliers face considerable risk when pricing construction projects, and optimistic pricing or late payments can quickly cause cash flow problems.
−
−	~~As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.~~

	= Purpose =		= Purpose =

−	The purpose of a down payment chain is to manage accounting practices during these long-term and sometimes difficult construction projects. This documented sequence of actions provides a framework that supports various reimbursement approaches - with different suppliers, subcontractors and providers - to ~~various~~ aspects of the project ~~throughout the course of the entire transaction~~.	+	The purpose of a down payment chain is to manage accounting practices during these long-term and sometimes difficult construction projects. This documented sequence of actions provides a framework that supports various reimbursement approaches - with different suppliers, subcontractors and providers - to different aspects of the project.

−	A payment chain documents multiple transactions to help organisations ~~do a better job of monitoring~~ costs through a series of partial invoices. When the job is completed, a final invoice is prepared to reflect adjustments that have been made during the process.	+	A payment chain documents multiple transactions to help organisations monitor costs through a series of partial invoices. When the job is completed, a final invoice is prepared to reflect adjustments that have been made during the process.

	In terms of accounting efficiencies, payment chains are designed to accomplish the following:		In terms of accounting efficiencies, payment chains are designed to accomplish the following:
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	= Types of payment chains =		= Types of payment chains =

−	~~Before creating a payment chain, the type of chain must first be determined.~~ There are two types of payment chains: debit side or credit side payment chains.	+	There are two types of payment chains: debit side or credit side payment chains.

	Debit and credit side payment chains are both constructed in the same manner. The only difference between the two is the incoming or outgoing payment data, which dictates whether the chain is debit or credit side.		Debit and credit side payment chains are both constructed in the same manner. The only difference between the two is the incoming or outgoing payment data, which dictates whether the chain is debit or credit side.
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	== Debit side payment chain ==		== Debit side payment chain ==

−	The debit side payment chain is suitable for transactions with customers. This can include invoice processing and transaction payments.	+	The debit side payment chain is suitable for transactions with customers. This can include invoice processing and transaction payments. It is designed to track receivables owed to customers along with corresponding incoming payments. It can also be used to gain insight into past and future payments.
−		+
−	It is designed to track receivables owed to customers along with corresponding incoming payments. It can also be used to gain insight into past and future payments.	+

	== Credit side payment chain ==		== Credit side payment chain ==

−	The credit side payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments.	+	The credit side payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.
−		+
−	It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.	+

	= Payment process =		= Payment process =

−	The Housing Grants, Construction and Regeneration Act includes provisions to ensure that payments are made regularly and promptly throughout the supply chain. Interestingly, the Act does not stipulate payment periods, simply providing that parties are free to agree what payments are due and when, i.e. the contract must set out an adequate mechanism for determining these matters.	+	The Housing Grants, Construction and Regeneration Act includes provisions to ensure that payments are made regularly and promptly throughout the supply chain.

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =

Editor at 16:18, 8 July 2020

2020-07-08T16:18:03Z

← Older revision		Revision as of 16:18, 8 July 2020
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	It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.		It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.
		+
		+	= Payment process =
		+
		+	The Housing Grants, Construction and Regeneration Act includes provisions to ensure that payments are made regularly and promptly throughout the supply chain. Interestingly, the Act does not stipulate payment periods, simply providing that parties are free to agree what payments are due and when, i.e. the contract must set out an adequate mechanism for determining these matters.

	= Related articles on Designing Buildings Wiki =		= Related articles on Designing Buildings Wiki =
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	* Ex gratis payment.		* Ex gratis payment.
	* Fair payment practices for construction.		* Fair payment practices for construction.
		+	* Housing Grants, Construction and Regeneration Act HGRA.
	* Procurement route.		* Procurement route.
	* Supply chains in construction.		* Supply chains in construction.

	[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Procurement]]		[[Category:Contracts_/_payment]] [[Category:Cost_/_business_planning]] [[Category:Procurement]]

← Older revision		Revision as of 09:34, 9 July 2020
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	As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.		As a result, payments are often the source of disputes which can ultimately lead to a breakdown in relationships and even project or business failure.

−	A ~~payment chain (or~~ down payment chain) is a method of organising accounting activities associated with payments as they relate to a contractual agreement.	+	A down payment chain is a method of organising accounting activities associated with payments as they relate to a contractual agreement.

	A down payment, which is sometimes referred to as an advance payment, or ex gratis payment, is when part of a contractual sum is paid in advance of the exchange, i.e. before any work has been done or goods supplied. Down payments are typically recorded as prepaid expenses by the payer and recorded as assets on the balance sheet.		A down payment, which is sometimes referred to as an advance payment, or ex gratis payment, is when part of a contractual sum is paid in advance of the exchange, i.e. before any work has been done or goods supplied. Down payments are typically recorded as prepaid expenses by the payer and recorded as assets on the balance sheet.
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	The purpose of a down payment chain is to manage accounting practices during these long-term and sometimes difficult construction projects. This documented sequence of actions provides a framework that supports various reimbursement approaches - with different suppliers, subcontractors and providers - to different aspects of the project.		The purpose of a down payment chain is to manage accounting practices during these long-term and sometimes difficult construction projects. This documented sequence of actions provides a framework that supports various reimbursement approaches - with different suppliers, subcontractors and providers - to different aspects of the project.

−	A payment chain documents multiple transactions to help organisations monitor costs through a series of partial invoices. When the job is completed, a final invoice is prepared to reflect adjustments that have been made during the process.	+	A down payment chain documents multiple transactions to help organisations monitor costs through a series of partial invoices. When the job is completed, a final invoice is prepared to reflect adjustments that have been made during the process.

−	In terms of accounting efficiencies, payment chains are designed to accomplish the following:	+	In terms of accounting efficiencies, down payment chains are designed to accomplish the following:

	* Make data entry more efficient.		* Make data entry more efficient.
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	* Control activities around long-term accounting tasks		* Control activities around long-term accounting tasks

−	= Types of payment chains =	+	= Types of down payment chains =

−	There are two types of payment chains: debit side or credit side ~~payment chains~~.	+	There are two types of down payment chains: debit side or credit side.

−	Debit and credit side payment chains are both constructed in the same manner. The only difference between the two is the incoming or outgoing payment data, which dictates whether the chain is debit or credit side.	+	Debit and credit side down payment chains are both constructed in the same manner. The only difference between the two is the incoming or outgoing payment data, which dictates whether the chain is debit or credit side.

−	== Debit side payment chain ==	+	== Debit side down payment chain ==

−	The debit side payment chain is suitable for transactions with customers. This can include invoice processing and transaction payments. It is designed to track receivables owed to customers along with corresponding incoming payments. It can also be used to gain insight into past and future payments.	+	The debit side down payment chain is suitable for transactions with customers. This can include invoice processing and transaction payments. It is designed to track receivables owed to customers along with corresponding incoming payments. It can also be used to gain insight into past and future payments.

−	== Credit side payment chain ==	+	== Credit side down payment chain ==

−	The credit side payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.	+	The credit side down payment chain is suitable for transactions with vendors and subcontractors. This also includes invoice processing and transaction payments. It is designed to track payables owed to vendors and subcontractors (or other providers) along with corresponding outgoing payments. As with debit side payments, it can also be used to gain insight into past and future payments.

	= Payment process =		= Payment process =