Why does it take so long to get paid in construction?
Imagine this: You’ve managed to overcome months of supply chain snafus, gotten up to date on your change order logs, and kept your projects running on schedule. Things are looking up, and your field operations are running like a well-oiled machine.
Out of nowhere, an email from your general contractor lands in your inbox: There’s a payment hold on your last pay app. What happened?
In the construction industry, cash flow isn’t just king; it can be the difference between just making payroll and building a solid foundation to take on new work. With owners pushing even more liability to subs in an industry already notorious for long payment terms and complicated payment requirements, it’s critical to understand why payments can be delayed.
Look out for the 5 things below to be proactive and keep your project finances on track.
5 reasons your payment is on hold
1. Incomplete pay apps
Your team is juggling cover pages, AIA billing forms, backup documentation, and more. It’s easy for even the most experienced construction accountants and project managers to miss a pay app requirement. Gathering all of the information and creating a single pay app can take 30 minutes or more per project, per month!
2. Lien waiver issues
A single typo or missing signature on a lien waiver can instantly hold up your payment but take hours or even weeks to find and fix. Without it, your GCs can’t pay you without exposing themselves to increased liability and legal risk. Between conditionals and unconditionals, partials and finals, primary and lower-tier — keeping track of your lien waivers can feel like a constant fire drill, and relying on an Excel spreadsheet to keep track of everything leaves plenty of room for error.
3. Missing compliance documents
Compliance items like certificates of insurance, union affidavits, and certified payroll can vary so much between different jobs. These ensure that you, the GC, and the owner are following regulations and other legal requirements. Getting these right every month requires careful coordination between the field and multiple back-office teams, each with their own documents and requirements to keep track of. Managing all of these items in different places means things can easily slip through the cracks.
4. Inadequate tracking and follow-up
Once your pay app is submitted, does it feel like it just goes into a void? Tracking invoice aging and following up on payments coming due each month can get complicated, especially when business is booming. Making sure your team follows up with the right people when it’s time to get paid for your work is critical to keeping your cash flow positive.
5. Preventable mistakes
Your team is managing dozens of projects with different requirements each month. A single missed email or broken Excel formula can hold up payment on a project for months at a time. Finding and addressing a simple mistake turns into a forensic accounting exercise, eating up hours of your team’s valuable time. Your best bet is to find a system that keeps your whole team on the same page and makes sure that nothing slips through the cracks in the first place.
Meet Siteline: Your secret weapon for construction billing
Trade contractors that use Siteline are protected against these 5 common reasons for delayed construction payments and more!
Siteline gives your entire team instant visibility into every pay app. We cut hours of emails, calls, and form-filling from your team’s workload each month. Every pay app is tailored to your GC’s exact requirements on Siteline so you never worry about a missing cover page or a typo on your G703 form.
All required lien waivers are sent out on time, every time for you and your vendors. No more chasing down vendors for a single missing document holding up thousands of dollars in payment!
Automated reminders and monthly reports let your team know when compliance documents are expiring and when it’s time to give your GC a call to follow up on payments.
With billing, lien waivers, compliance, and more all in one centralized system, your field, accounting, and executive teams can stop losing sleep over payment delays and focus on the heart of your business: building the places where we live, work, and play.