Why late payments are stalling construction projects, and how to break the cycle

Seventy percent of general contractors and subcontractors consistently face late payments, costing the construction industry nearly 300 billion dollars last year. In today’s economy, GCs and subcontractors are already working on incredibly thin margins. Without cash coming in when planned, there is a ripple effect to their business, from a delay in purchasing materials to covering payroll to even forgoing bids on new projects. The average payment cycle in the construction industry is 90 days, which is double the 45-day threshold that financial analysts consider a healthy business. This means that a contractor completing work in August won’t get paid until November. That’s an incredible operational risk, as fixed costs for a business such as rent and taxes are still due, even if customers have not paid. Standardizing estimates Creating detailed, standardized estimates will help minimize disputes before the bid is even accepted. A clear estimate ensures all parties involved are aware of the payment required, including specific terms and timelines. An article on the U.S. Chamber of Commerce around late or non-paying customers says it best: “The best time to establish boundaries over l...