I was sitting at the reception of one of my EPC clients. One man was sitting at the reception, very upset and tensed. I asked one of the senior employees of the firm, about the person. I came to know that he was a subcontractor to the firm. This was his first contract, so he had agreed to work at a very low price which anyone in the field could have easily told that he was working at a loss. The reason for his being upset was that our firm had not paid him for completed milestones for the last 4 months as per the contract. Since he had limited cash flow, he was unable to give payments to his workers as well as vendors from whom he had purchased material or rented equipment. On further going deep into the matter, I found that in our firm (or in any other firm) it is a known fact that money is paid to sub-contractors or vendors only after 6 months of receiving the milestone or product (completion of activity). Here let me make it clear, that usually as per the contract the payment is promised within 60 months of delivery of the milestone. What firms normally do is - have a complex approval process inhouse so that after submission of the invoice by a subcontractor- internal processes take at least 15 days to look into the invoice, If deliverables are found good, then the counting of 60 months start from the date when the invoice was found to be verified by the firm and not from the date of submission of the invoice by the vendor. Only 20-30% of invoices are usually approved at the first round, usually, the verifying authorities have a tendency to find some faults or seek clarifications on the invoices which further delays the payment timelines. In the worst cases, I have seen payments getting delayed by 2 years from the date when the invoice was submitted. I feel such behaviours need to be changed.

Well coming back to the sub-contractor I mentioned earlier. He had done a pretty good job and everyone at the site was happy. The problem was he was a small contractor without any influential connection. Our firm did not have sufficient cash flow as we were also facing the same situation, our customer had stopped our invoices. Whatever limited cash flow was available with my firm, they were ready to pay influential subcontractors or vendors who had the capacity to stop the work at the site. The motto for payment was that the show must go on. Our project management team was getting this poor chap in trouble by asking him to fulfil some compliance things etc at his end with an intention to extend the time legally.

I saw that subcontractor coming to our office every day. One day I asked him, whether he would like to work with us in the future. He saw me with an angry face and said never in this life.

We lost one good partner who was skilled in work but not a good negotiator or businessman (as it is said in present-day terminology). Subcontractors like him were hired afterwards, but no one was able to give the quality work which was delivered by him. I told the owner of my firm that if you had fed the person appropriately in his journey with the right amount of cash flow- he would have been your long-time partner and your deliverables would not have been affected. I learned one thing in life, do not try to dry up the funds from your ecosystem partners instead feed them when you find their cash flows drying up otherwise you are destroying a partner instead of developing a long-term collaboration.

If you have encountered any incident like this around you, please share in the comment section.