Construction loan software provider Contract Simply's Construction Payment Report 2018 has revealed late payments from customers cost the commercial construction industry $40 billion annually, according to www.constructiondive.com. The amount represents an add-on to total project costs of 3.3 percent.
Conducted in partnership with bid procurement platform Building Connected, the report found 88 percent of the 1,300 contractors surveyed wait longer than 30 days for payment, and 46 percent cover the gap with business or personal savings and credit lines, resulting in extra financing fees. Seventy percent of contractors reported they would be willing to discount invoices in exchange for payment within 30 days.
Late payments can negatively affect subcontractors' ability to meet their payroll and invoice payment obligations. The Construction Payment Report 2018 suggests methods contractors can employ to speed up the payment process, including using digital invoicing and payment solutions and modifying contract language to clarify when payment is due. In cases where payment is not made due to reasons other than not being able to navigate the payment process, contractors can take legal action to recover money owed. Filing a mechanic's lien against a private project ensures payment, but it's not a quick solution and can create tension between the involved parties. Nevertheless, more than 80 percent of contractors reported they have filed mechanics' liens against projects to ensure they receive their money.