Why Late Payments Hurt More Than You Think
By the time an invoice hits 90 days past due, it’s typically worth only 70 cents on the dollar. Inflation, interest, and the simple cost of waiting all chip away at your revenue. On top of that, most construction companies end up writing off about 4% of their A/R each year as bad debt. That’s $400,000 lost for a firm doing $10 million annually.
So what can you do to protect your margins?
Here are 7 proactive steps to help subcontractors tighten up their collections process and get paid faster.
1. Negotiate Smarter Contracts from Day One
- Push back on “pay-if-paid” clauses and negotiate for “pay-when-paid” language when you can.
- Clarify what’s required for pay applications, down to the forms and submission deadlines.
- Understand the retainage terms, including when withheld payments are released.
- Review lien waiver and preliminary notice requirements by state or project type.
If a term feels risky or unclear, speak up. Clear expectations now can prevent cash flow chaos later.
2. Make Pay Applications Foolproof
Set up a system to ensure your pay apps are:
- Accurate – Double-check forms and attachments
- Complete – Include all necessary supporting docs
- On time – Submit through the right channels, every time
Digital tools can help automate this process and reduce errors—because one small mistake can delay your whole payment.
3. Track Every Change Order
Extra work without a paper trail? That’s a fast track to billing disputes. Protect your revenue by requiring written change orders for all out-of-scope tasks. Bonus points if you use software that tracks approvals in real time.
4. Keep an Eye on Your A/R Aging
Know your numbers. Monitor your Days Sales Outstanding (DSO) to:
- Spot which GCs pay quickly (and which don’t)
- Build better cash flow forecasts
- Adjust your bidding strategy to favor better-paying clients
The longer an invoice sits, the harder it is to collect. Don’t let them age without action.
5. Have an Escalation Plan for Past-Due Invoices
Waiting in silence doesn’t get you paid. Implement a structured A/R escalation process, with:
- Immediate outreach on overdue payments (include invoice #, amount, due date)
- A set follow-up schedule using multiple communication methods
- Clear internal ownership for each step, so no one drops the ball
When everyone on your team knows their role, your collections become consistent and predictable.
6. Know (and Use) Your Lien Rights
You hope it never comes to this—but if it does, you need to be ready. Understanding your lien rights is key. File preliminary notices at the start of a project and be aware of the deadlines for your state.
Think of it as setting the tone early: We’re professionals, and we expect to be paid on time.
7. Leverage the Right Tech
Manual collections are a full-time job—and not a fun one. Today’s subcontractors need billing and A/R tech that can:
- Centralize pay app status in one dashboard
- Send automated reminders to clients when payments are overdue
- Organize collection tasks and timelines
- Generate real-time reports for smarter decisions
Technology won’t do the work for you, but it can make your efforts 10x more effective.
Final Thoughts
Getting paid faster isn’t just about survival—it’s about positioning your business to grow. When you tighten up your collections process, you free up cash to invest in equipment, talent, and future jobs.
At J&S Moore Financial Group, we help subcontractors and construction firms build systems that support smoother billing, better cash flow, and sustainable growth.
Need help improving your A/R process or building a budget that works?
