Late and Non-Payments Issues in the Malaysian Construction Industry: Perspective of Building Material Suppliers

Abstract

Payment in the Malaysian construction industry has generally been an issue of concern. Late and non-payment problem is endemic in construction and needs to be addressed. The aim of this study is to investigate the issues related to late and non-payment based on the building materials suppliers’ perspective. Questionnaires were distributed to suppliers of building materials in the Klang Valley. Findings from the study shows the main cause of late and non-payment is the paymaster’s poor financial management while the main effect of late and non-payment is problem with the cash flow. The most recommended possible solution to cope with the issue is for the paymaster to conduct training on financial and cash flow management to the management team in the company.

The Awareness Of CIPAA in Remedying Payment Issue Among Contractors In Malaysia

“…Each of the provisions in these basic types of contracts explains when the representation of the employer must undertake valuation, and the clauses spell out the payment methods that bind the parties to the contract. The construction players have often argued that they have not been paid or that the employer has unduly delayed payment [2]. The payment problems have consequences for the whole construction project.…”

Determinants of Supplier Payment Times before and during the Pandemic: Empirical Evidence from UK Firms

“…The negative effects of extended payment, late payment and nonpayment have been captured in cross-national studies. Suppliers have reported cash flow problems leading to difficulties paying their own suppliers, postponing investments in their operations, and freezing staff remuneration and hiring because customers did not pay on time (FSB, 2017;Ishak et al, 2019;Intrum, 2021). Then there is the resource cost incurred by suppliers in chasing up debtors; resources that could be directed towards productive activities like customer risk assessment (Paul and Boden, 2011).…”

“…Long payment waits and late payment are prevalent in the construction sector -46% of the 355 payments across 30 projects examined by Bolton et al (2022) were late, for example. These problems stem from paymasters' deliberately withholding funds or mismanaging their finances (Abdul-Rahman et al, 2014;Ishak et al, 2019), high frequency of payments (Bolton et al, 2022) and the bureaucracy involved in having payments authorised or variations approved (Peters et al, 2019). This leads to the following hypothesis.…”

“…The problems start when buyers require longer than normal to pay i.e., extended terms or do not pay by the agreed date i.e., late payment. Surveys show that most suppliers contend with lengthy payment and late payment and that their effects are felt in constrained cash flow, restrictions on growth and strained customer relations (FSB, 2017;Tymowski, 2018;Ishak et al, 2019).…”