Who doesn’t want to be paid on time? This has been the problem of general contractor industry for awhile. It happens so often that people think it’s the norm. There was even a survey conducted by Levelset in the first quarter of 2020 where they found out that 15% of construction companies even wait for 60 days to get paid. With these late payments, the general contractors usually charge an interest for late payments, however, most subcontractors don’t. So the problem intensifies as you go down the ladder.
However, looking into this issue much closer, we must know that construction projects are being paid based on the work or progress they make. If their clients aren’t satisfied or if the deadline hasn’t been met then there will surely be a delay in the payment. Therefore setting proper expectations is one way to avoid late payments.
In a recent article by For Construction Pros, they pointed out that better communication between the contractor and the client is key to faster construction payments. They write, “Subcontractors are less likely than GCs to take actions that speed up payment. While 36% of GCs charge interest on late payments from their customers, only 22% of subs consider imposing a penalty on the GC when payments are overdue. And even though the mechanics lien is one of the most powerful payment tools available to contractors, only 45% of subcontractors say they always protect their right to file a lien.”