How to Get Paid On Time for Construction Trades

Getting paid on time is key to the success of every business. Managing predictable cash flow ensures the consistency and enables you to optimize the value of every dollar. Unfortunately, predictable cash flow from timely payment is also one of the most challenging aspects of operating a construction business. Subcontractors, in particular, often face challenges when it comes to timely payments. Here are some essential tips to help you secure your payments without any delay. 

Favorable Contracts:  A great place to start is with Clear Contracts and Agreements. Before starting any project, ensure that you have a well-drafted contract in place. This contract should clearly outline the scope of work, payment terms, deadlines, and any conditions for payments that may  include acts of God or damages from others. The more explicit you are in detailing your expectations, the less room there is for misunderstanding. Do not be afraid to push back on retainage amounts, pay-when-paid, liquidated damages, and other clauses that can impact you being paid what you are owed in a timely manner.

When reviewing a contract. Understand the Payment Schedule and follow the outlined instructions on when, how, and who when submitting invoices. The last thing you would want is to create a delay due to a clerical error by sending the invoice to the wrong person or department. A structured payment schedule not only helps you manage your cash flow but also gives the client clear expectations about when payments will be made.   

If you are unfamiliar with contract language or uncomfortable negotiating contracts, find someone who can help or reach out to us at Virtus Support Services. One bad contract can ruin an entire year of work. You are better off with fewer good contracts than more contracts if one of them ruins the bunch.   

Communicate Effectively:  Maintain regular communication with the general contractor and any other relevant parties throughout the project. Update them on your progress and flag any potential issues that could affect the projects schedule. Good communication can help build trust and lead to timely payments! 

Keep Detailed Records: Document everything related to your work on the project. This includes contracts, change orders, correspondence, photos/ videos, and any approvals or inspections. Having detailed records can protect you if disputes arise and can serve as proof of work completed, which is vital when requesting payment. A great way to keep all your submitted documents, notes and photos organized and in one place or to use Google drive or other file sharing services. This will also allow your team to share information with your company and the general contractors team. 

Send Correct Invoices Promptly: As soon as you complete a milestone or the agreed-upon work, send your invoice immediately. Make sure you follow contractual invoicing instructions and contact your customer’s AP department to see if there is anything you can add to your invoices to make their jobs easier. Ensure that your invoices are clear, itemized, and include all relevant details such as your payment terms, due date, and payment methods. Prompt invoicing encourages timely payment. 



Accountability: Make sure your project manager understands that he is absolutely accountable for not just submitting pay applications on time, but actually being paid on time. Part of your project manager’s incentive pay should be tied to payment being received on time. Make sure crew chiefs, field engineers, and any other personnel in the processes leading up to pay applications understand the important of accurate and complete documentation as it relates to being paid on time.

Follow-Up: If a payment is late, don’t hesitate to follow up with the client. A polite reminder can often expedite the payment process. Make this a core practice to follow up a few days before the payment due date and again a few days after if you haven’t received it. Do not have your company owner or CEO make collections calls. This is a sign to general contractors that you are small and not likely capable of executing meaningful collections. It also places leadership in the role of being the bad guy and you do not want that. Let someone else take on that role. Have a person on staff or outsource collections. 

Lien Process Paperwork: Make sure you file Notices to Owner within the required deadline and use Notices of Intent to Lien when payments are late. Make sure you understand the lien laws in your state and make sure you use the lien process.

Multiple Payment Options: Make it easy for your clients to pay you by offering multiple payment options, such as bank transfers, credit cards, or online payment platforms. Always offer the option that costs you the least amount to facilitate the payment first. research has shown the more convenient you make the payment process, the more likely you are to receive payments on time. 

Build Relationships: Establishing strong, professional relationships with clients can lead to better communication and improved payment practices. Treat clients with respect and professionalism, and they are more likely to reciprocate by honoring payment terms.

Understand Retainage: Retainage is a percentage of the payment withheld until the project is completed to the contracts satisfaction. Make sure to clarify how much retainage will be held and the conditions for its release to avoid surprises at the end of a project.

Know Your Rights:  Familiarize yourself with the laws and regulations regarding payment in your jurisdiction. Knowing your rights as a subcontractor can empower you to take appropriate action if payments become delayed or denied. 

Getting paid on time is essential for the success of any business. By implementing these strategies, you can enhance your chances of receiving timely payments and build a more sustainable business. Remember, clear communication, detailed contracts, and proactive follow-ups are your best allies in ensuring that your hard work is rewarded promptly.

Auth: G.M. Sieber and Gerald Green, Virtus Support Services

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