Why unpaid invoices matter more in construction recruitment
Running a construction recruitment agency comes with tight margins. Turnover is often high but a big chunk of that is going straight back out to pay contractors every week or two.
This set up just about works if customers pay on time. If not, it can quickly become a big cash flow problem. This article looks at the industry-specific problems and what a good credit control process looks like in this sector.
Why construction clients pay late
Late payment is particularly common in construction - it is one of the only industries called out specifically in the government’s 2026 measures to tackle late payment.
This is not just a symptom of laziness or poor organisation. The industry runs on a payment chain:
- The developer pays the main contractor
- The main contractor then pays the sub-contractor(s)
- The sub-contractor in turn waits before paying the agency
When a project hits a delay, the cash flow knock-on works its way down that chain.
Understanding this context shapes how you chase down overdue invoices. A client who is waiting on their own payment needs a different approach to one who has simply forgotten to process your invoice. Treating both the same way with a generic automated reminder can damage relationships.
Why standard credit control practices often fail in this sector
There are some structural differences in the construction recruitment sector that mean standard credit control approaches don’t apply. Here are a few of the top ones.
1. Debtor management software is often priced on revenue
Many invoice chasing tools charge based on the total revenue processed which doesn’t work for construction recruitment agencies with tight margins. Yes, turnover is high, but most of that goes back to paying contractors.
This makes most automation tools too expensive for the average recruitment agency.
2. Often the client will be genuinely waiting on payment
As discussed above, there are legitimate reasons a client’s own payment is delayed.
This does not mean you should not chase - you absolutely should - but it changes the way you handle the reminder. An email from your own inbox in your tone of voice lands differently to a standard “Dear Sir / Madam” reminder.
3. Credit insurance creates a reporting obligation
Many construction recruitment agencies carry credit insurance which covers them against bad debt if a client fails to pay. Credit insurance typically requires you to report slow payers within a defined timeframe. If you don’t notify them, you may find a claim is rejected on these grounds.
This means you are not just sending reminders to debtors. You also need to notify your credit insurance in good time to make sure your claim stands if you need it. This is a new requirement that most standard credit control does not cover.
Some quick (free) wins to improve your invoice collections process
Given these specific requirements, here are a few solid (and free) steps you can take to improve your collections process.
Start before the invoice is overdue
Send a reminder a few days before the due date flagging the invoice, confirming payment details and checking for queries. This removes the excuse of “we didn’t receive it” and surfaces any disputes before the invoice is overdue.
Send it from a person, not a system
Emails that come from your own inbox are less likely to be ignored or spam filtered than those from Xero or Quickbooks.
Map out a clear escalation path
After two reminders receive no reply, a different type of contact is needed. This could be escalation to a more senior staff member or sterner email language. Having this mapped out in advance means it happens consistently.
Build a process for referral to credit insurance
You need a system for notifying your credit insurance if invoices are regularly going over 60, 90 or 120 days (different insurances need different time frames). One option is to check Xero’s aged debtors report weekly which buckets invoices into 90 days overdue. Read our article on understanding your Xero aged receivables report.
For a broader view of what the data shows about reminder frequency and effectiveness, our analysis of thousands of invoices is worth reading: Two reminders will recover 80% of your overdue invoices. Here’s the data
Credit control tools: A few options
Usually construction recruitment agencies look into automation because a manual process is becoming unmanageable. If you are seeing your unpaid invoices increase each month, automation is a good idea.
Xero invoice reminders
This is a good starting point if you are already using Xero for invoicing. They are free and simple to set up. They have some limitations (covered in our guide) but for agencies just starting to formalise their process, this is fine. Full guide: When to use Xero reminders for chasing invoices - and when to upgrade
Chaser HQ
Chaser is one of the most established invoice chasing tools in the UK market and works well for mid-size businesses. The main consideration for construction recruitment agencies is the pricing model: Chaser’s fees scale with revenue, which as discussed above can become expensive for high-turnover agencies with thin margins.
Trove
Trove does the essentials without any frills or add-ons. It sends from your own inbox, has the ability to automate notifications to credit insurance, and is priced at a flat £50 / month regardless of revenue or invoice volume. Finally, you can use AI to rotate email wording so repeat reminders do not feel templated.
You can start a 30-day free trial of Trove here: Start your free trial.
Frequently asked questions
What are standard payment terms for construction recruitment agencies?
Most construction recruitment agencies invoice on 30-day terms, though 14-day terms are increasingly common for temporary placements where the contractor has already been paid. It is worth negotiating payment terms at the point of signing terms rather than accepting it as given.
Can I charge late payment fees to construction clients?
Yes. Under the Late Payment of Commercial Debts Act, you are entitled to charge statutory interest of 8% above the Bank of England base rate on overdue invoices, plus a fixed debt recovery fee of £40-£100 depending on the invoice value. In practice, many agencies do not enforce this with ongoing clients - but having it in your terms and referencing it in your reminders can accelerate payment. Full guide: How to calculate late payment fees in the UK
What is credit insurance and why do construction recruitment agencies use it?
Credit insurance protects your business against the risk of a client failing to pay - either because they go insolvent or because of a protracted default. In construction, where clients can be exposed to project failures or main contractor insolvencies, this risk is real. Most policies require you to report overdue invoices within a set period, typically 60-90 days, and to demonstrate that you took reasonable steps to collect. A documented collections process is therefore a requirement of the policy, not just good practice.
How do construction recruitment agencies improve cash flow?
The two most direct levers are shortening payment terms where possible and reducing the time between invoice issue and payment. On the first, negotiating 14-day rather than 30-day terms at the point of signing new client agreements makes a meaningful difference. On the second, a consistent and prompt collections process - starting before the invoice is due rather than after - is the most reliable way to move the dial. Invoice financing is also an option for agencies that need to smooth cash flow between invoice issue and payment, though it comes with its own costs.
What is the best invoice chasing software for a recruitment agency?
It depends on your size and how you want to manage client relationships. Xero’s built-in reminders are sufficient for small agencies just getting started. For agencies that want more control, a personal approach, and predictable costs, Trove’s Essential Plan (£50 / month) is a good upgrade option.
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