This article is sponsored by Procore.

Slow payments create significant challenges for all project stakeholders.

According to the PwC, the construction industry has a median days sales outstanding (DSO) of 83 days — the longest of any industry. This means contractors experience a median of 83 days to collect payment for their time and materials funded with credit.

These delays can strain relationships, put finances at risk, and potentially lead to costly litigation. 

The good thing is that you can fix construction payment problems by taking these proactive steps:

1. Implementing a Construction Management Platform

Implementing a construction management platform with payment processes and documentation built in is the first step in speeding up payments and reducing problems.

Using the same technology that you use to plan, bid, manage, and close out a project means that GCs and specialty contractors can simplify and streamline construction’s highly complex payment process. 

2. Utilizing Technology to Improve On-Time Payments 

In addition to the reduced administrative burden to execute payments, utilizing technology to improve on-time payments is important for GCs. 

Given the slow payment standards and the expectation for specialty contractors to carry the capital expense for a project, some have begun offering discounts for promptly paid invoices. In other situations, GCs have extended similar terms to specialty contractors through formalized early payment programs.

These mutually beneficial arrangements reduce costs for GCs while bolstering cash flow for specialty contractors, enabling greater contributions to ongoing and future projects.

3. Ensure You Have a Faster Payment Process 

Faster, more efficient payments are a win-win for all project stakeholders.

A faster payment process benefits every project stakeholder in construction by reducing administrative burden, limiting carrying costs, and strengthening business relationships.