Financing of Construction Companies
Frequently in the construction sector considerable liquidity tensions are created, especially in small and medium-sized companies, induced by long execution periods, fluctuations in the price of raw materials and a shortage of specialized labor.
In order to facilitate the financing of construction companies, the construction certificates allow the invoice of the work carried out in each of the phases of the project and thus be able to charge regularly without endangering their financial stability.
Construction Certifications: What are they?
The work certifications are documents issued by the Project Management that recognize a liquid debt as consideration for the work units carried out during the reference period.
They allow assessing the work done in each of the phases of the process and billing the amount of that executed part of the budget, receiving the corresponding partial payment.
This liquidation obtained allows companies to collect materials, pay payroll or make any payment they need to continue with the project.
Work certifications emanate from the budget agreed between the parties. Any modification will be made through justified deviations.
A work certification is relevant because it groups the following functions:
What should a Work Certification include?
All the data listed below must appear clearly and visually in the certification:
- Certification data: The certification must have an identification number that serves as a reference, a date of creation and must mention the period of execution of the works carried out.
- Contractor and client data: CIF / NIF, company name and registered office.
- project information: Detail of the work carried out, indicating
- – Start and end date
- – Location of the work (municipality and province)
- – Breakdown of each of the items, clearly detailing the amount of the tax base and applicable taxes
- – You must indicate the percentage of work carried out to report on the evolution of the work, specifying the total accredited in previous certifications.
- – The file number of the work.
- – If there are deviations, they must be justified and assessed.
Types of Certifications
Based on the number of certifications to be issued, a distinction can be made between partial execution certifications y unique certification.
Partial execution certifications
This type of certification is the most common and involves a partial billing of the project, instrumented in ordinary certifications.
Once the final certification has been completed and the guarantee period has elapsed, the contract may be settled through the settlement certification, also known as complementary final certification.
Ordinary certifications are payments on account, since the work contract is not divisible and is only considered complete when it is executed in its entirety. Payments linked to these partial certifications are subject to rectifications and variations that occur in the final measurement.
Ordinary certifications are based on measurements of the work units executed during the specified period. Once taken, the construction manager will draw up the relationship valued at origin. The work carried out will be valued at the prices that appear in the annex or table of unit prices of the project, taking into account any payment for defects in work and raised items (units of work with a price set arbitrarily).
Within the partial execution certifications, according to the billing terms, the most advantageous are the periodic certifications, usually monthly, because unlike the phased certifications, delays in the execution of the works will reduce the probability of generating possible liquidity tensions or incidents in the correct development of the work. However, periodic certifications require greater control and speed in their preparation.
Final certification of work
La final certification of work is elaborated once the project is finished.
It requires a notarial deed signed by the construction manager, as well as a visa from the competent professional association.
With this certification, the project is considered completed and the construction can now be used for the established purpose.
It is for this reason that this certification acquires a tacit relevance and constitutes one of the most important documents of the work.
Unique certification
It supposes the total payment of the work once it is finished.
It is instrumentalized in the same way as the final work certification, commented within the partial execution certifications.
Certification by collection
They are credits on account for preparatory operations for the execution of the project, which can be given within the partial certifications of execution.
In the public sphere, the contractor may receive these payments on account up to a maximum of 75% of the value of the materials collected, under the express authorization of the competent body.
Who grants the validity of the work
The Facultative Management of the work will give its approval to each certification through the signature by the architect, surveyor and/or engineer, as the case may be, as well as the final certificate of work, a document that certifies that the works for which it has been requested a building license are finished.
How to finance them
After validation of the certification by the corresponding technicians, the builder can issue the invoice, on which the VAT corresponding to the works included in it will be charged and will allow the builder to obtain liquidity without waiting for the completion of the project. .
Regardless of how the works are certified and the delays that may arise in their payment, the invoice advance allows the builder to obtain immediate liquidity without having to wait for the credits to expire.
WORK CAPITAL SA facilitates the advance payment of invoices issued to both public and private organizations. You can use this easy solution to alleviate liquidity tensions that may affect you in long payment terms.
Find Out More
For more information on work certifications, the following legislations can be consulted:
Royal Decree 1098/2001, of October 12, which approves the General Regulations of the Administration Contracts Law
https://www.boe.es/buscar/pdf/2001/BOE-A-2001-19995-consolidado.pdf
Law 9/2017, of November 8, on Public Sector Contracts, which transposes into the Spanish legal system the Directives of the European Parliament and of the Council 2014/23/EU and 2014/24/EU, of February 26, 2014
https://www.boe.es/buscar/pdf/2017/BOE-A-2017-12902-consolidado.pdf
Law 38/1999, of November 5, on Building Management
https://www.boe.es/buscar/pdf/1999/BOE-A-1999-21567-consolidado.pdf
Work Certification Model
Generalitat Valencian Fountain
https://workcapital.es/wp-content/uploads/Modelo-Certificacion-Ordinaria-GVA.pdf
Final Work Certification Model
Source COAM – Official College of Architects of Madrid
https://workcapital.es/wp-content/uploads/Modelo-Certificado-Final-obra-COAM.pdf
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