The construction industry’s payment friction has intensified in recent cycles.
Industry data from a 2024 report reveals that 82% of companies now face payment waits of more than 30 days, up from 49% just two years ago.1 Median time to pay is approaching 90 days, which is 2-3 times longer than several other industries.2 Rising interest rates and tighter lending standards are extending pay cycles as owners hold onto cash longer.
The financial impact extends far beyond delayed cash flow. Slow payments reportedly cost the construction industry about $280 billion in wasted costs in 2024,3 causing 65% of subcontractors to file liens in 2023 — an increase of 141% from just the year prior.4
These statistics point to a core financial truth: traditional reactive billing approaches create avoidable working-capital risk — but it is possible to shorten days to cash by tightening terms, standardizing pay apps, and enforcing a disciplined accounts receivable (A/R) cadence.
Review Your Contract
Contracts set the tone for how and when contractors get paid. Before signing anything, loop in finance early so A/R, project accounting, and operations can review the contract thoroughly.
For longer projects, evaluate critical payment language every six months.
Additionally, scrutinize the following cash-sensitive elements.
Payment Terms & Language
Always push to replace pay-if-paid language with pay-when-paid. Though neither is ideal, pay-if-paid is inherently riskier. Many states restrict or void pay-if-paid.5
Pay App Requirements
Every construction project has unique pay application requirements and forms. Build a client-specific checklist:
- Does the project use American Institute of Architects (AIA) billing forms or another payment application form?
- Does your pay application need to be notarized?
- When can you submit requests for progress payments? Monthly? Quarterly? After certain stages?
- What’s the deadline for submitting payment applications?
- How do you submit pay apps? Does the GC use a payment portal?
Lien Rights & Waiver Requirements
Watch for preemptive no-lien clauses that waive your right to file a lien before the project starts, essentially agreeing to work without any payment protection. While many states restrict them, always redline these provisions.
Also review subordination language that could put you last in line if a lien foreclosure occurs.
Document each project’s waiver requirements:
- Are lien waivers required?
- Does the GC have specific waiver forms?
- Do waivers need notarization?
- When and how are waivers submitted?
- Which lower-tier vendors are required to submit lien waivers?