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Trade Contractor
What is a Trade Contractor?
AA trade contractor, also known as a subcontractor, is a specialized construction professional hired by a general contractor (GC), construction management property, owner, developer, or other entity to complete specific aspects of a construction project. Trade contractors typically specialize in a particular trade or craft, such as electrical work, plumbing, HVAC installation, framing, roofing, glazing, flooring, or drywall installation. They are bound by a contract that outlines the tasks to be performed, deadlines, and terms of payment.
Trade contractors are distinguished from GCs in several ways. GCs oversee the entire construction project, managing all aspects from start to finish, including coordinating trade contractors, obtaining permits, and ensuring compliance with building codes and regulations. Trade contractors, on the other hand, focus solely on their specialized area of work and are responsible for completing their specific tasks according to the project's plans and specifications.
Trade contractors face extensive payment cycles, as they cover all labor and material costs upfront for a project yet receive payment last. Progress billing further complicates the matter, mandating that GCs only reimburse trade contractors based on project completion percentage. This system requires trade contractors to invoice GCs every month for the work completed, which exposes them to various factors that can delay progress billing further. These include:
- using the wrong pay application form,
- missing documentation,
- lien waiver oversights,
- submitting pay apps through the wrong GC portal,
- general project delays and disputes, or
- the GC’s own cash flow issues.
As a result, most trade contractors wait about 90 days to get paid for the work they’ve already done, which can strain their cash flow and hamper their ability to take on new projects or pay their employees and suppliers.
This is where Siteline comes in. Siteline is a construction billing solution built specifically to streamline the subcontractor A/R workflow. With Siteline, trade contractors can easily generate and submit detailed pay apps tailored precisely to each GC's requirements. The platform also:
- tracks all compliance requirements and stores pertinent documents;
- tracks, collects, and submits lien waivers for the sub and their lower tiers;
- ensures approved change orders are incorporated into the schedule of values;
- provides full visibility into billing statuses across projects—including which GCs pay fastest to better anticipate cash flow; and
- creates accurate billing projections to monitor progress and effectively manage backlog.
By eliminating manual spreadsheets and centralizing all billing data, Siteline helps trade contractors accelerate their payment cycle by an average of three weeks. Discover how Siteline can get your subcontracting business paid faster by scheduling a demo today.
Trusted by trade contractors across the country
Other construction terms
What is Applied Overhead?
Applied overhead, in the context of the construction industry, refers to the allocation of indirect costs incurred during the construction project. These costs can include utilities, rent, salaries of non-project staff, equipment depreciation, or insurance. These costs do not directly contribute to a specific project but rather the operation of the business as a whole. In construction, these costs are typically distributed to each job based on a formula that might involve labor costs, materials cost, or some other fair measure. Understanding applied overhead is integral to accurate job costing and ensuring a construction project's profitability. Managing and accurately tracking these expenses can mean the difference between a successful construction project and one that loses money. Hence, applied overhead is a crucial financial aspect of any construction project.
What is a Contingency?
In the realm of construction, a contingency refers to a certain amount of money set aside to cover unexpected costs that might arise during the project’s execution. This allocation, usually accounting for an estimated 5-10% of the total project cost, acts as a financial cushion, providing security against unforeseen circumstances such as construction delays, changes in building codes, design modifications, or a surge in material prices. Additionally, it could also account for potential legal issues such as disputes over contracts. Overall, a contingency is an essential risk mitigation element for construction projects to ensure a smooth transition even in the face of unpredicted challenges.
What is Accrual Accounting?
Accrual accounting is a method of accounting that records financial events based on occurrences rather than on cash flow. In the context of the construction industry, this could include recognizing revenues and expenses tied to a specific project when they are earned or incurred, not when the money is actually received or paid out.For example, if a construction company orders materials for a project, under accrual accounting, the expense is recorded as soon as the order is made, regardless of when the actual payment is made. Similarly, if a customer is billed for a completed phase of the project, the revenue will be recorded even if the cash hasn't been received yet. This type of accounting provides a more accurate picture of a construction company's financial health by aligning income and expenses to the appropriate fiscal periods. It enables firms to match revenues with the corresponding costs, delivering a holistic view of a project’s profitability. However, it can also complicate cash flow management as there may be a time lag between recorded revenue and actual cash receipt.
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