Report: GCs more likely than subs to get paid on time

Dive Brief:

  • Contractors working on residential jobs say their rate of prompt payment is significantly better than those on commercial or public jobs, according to a new report from construction software company Levelset.
  • Contractors working on residential projects are more than twice as likely as those working on public projects to report getting paid within 30 days, with residential construction contractors saying they are paid in 30 days or less 48% of the time and public construction contractors saying that only happens 21% of the time. 
  • In addition, significantly slow payments of 60 days or more are three times more likely on public construction projects than on residential construction projects, according to the 2022 Levelset Cash Flow and Payment Report released Monday. Residential contractors say it happens rarely, just 6% of the time, while public project contractors say it happens nearly one out of five times (18%). 

Dive Insight:

Although payment problems affect companies throughout the industry, general contractors tend to have fewer problems collecting payments compared to other types of construction businesses, the report said.

GCs are four times more likely than subcontractors — and 20 times more likely than material suppliers — to report always receiving payment on time. Survey data also revealed that GCs are twice as likely as subcontractors to get paid within 30 days. Meanwhile, one out of five subcontractors notes that their average customer takes more than 60 days to send payment.

To ensure prompt payment, a greater portion of contractors working on residential construction projects believe that interpersonal communication and high-quality work, relative to their commercial and public counterparts, are vital to prompt payment. Conversely, a greater percentage of commercial and public project contractors believe that process-related variables play a greater role in timely payment.

Contractors of all types take a variety of steps when payments are late.

What actions do you take if payment is late?

Send invoice reminder 75%
Call to follow up 73%
Send intent to lien 40%
Send a demand letter 34%
File a mechanics lien 25%

SOURCE: Levelset

Although the contractors surveyed may work on different types of projects, they share one major thing in common — their challenges for the upcoming year. Out of 20 different potential challenges, residential, commercial and public contractors chose the same top five challenges:

  • Increasing costs.
  • Supply chain issues.
  • The changing economy.
  • Staffing.
  • A potential pandemic “hangover.” 
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