Contractors are pinched for cash, wait too long for payment
Getting paid in construction is slow, hard, and stressful for contractors according to a survey of 500+ contractors conducted by Levelset and TSheets by Quickbooks. The survey results are published this week by Levelset here: 2019 National Construction Payments Report.
Some key highlights from the report show that contractors struggle significantly in trying to get paid...and handling the cash crunch related to slow payment:
About half of contractors complaint they are not paid on time
40% of contractors are not paid in full on every job, complaining of back charges, deductions, and other setoffs get tacked on at the end of a job
42%+ are always and 30%+ are sometimes stuck paying for labor, vendors, and materials before they receive payment on a job
35% of contractors dip into personal savings and credit to make ends meet and keep the business afloat
One of the most alarming elements of the report is that contractors really don't have many places to turn to when experiencing payment problems, and that they too frequently compromise.
For example, contractors could file a mechanics lien if they are unpaid. 98% of contractors said they have threatened a lien to get paid. But only 58% have filed the lien. And why haven't they filed the lien? Too frequently because of compromises like not wanting to lose the customer (41%), the process being "too complicated" (14%), and the process being too expensive (12%)!
Another example of compromise is how accommodating contractors are when unpaid or slow paid on a job. A whopping 61% of contractors said they do not charge interest on late payments, and 17% more said they rarely do. That's 78% of people who just let late payment go by the way-side and be completely inconsequential for the late payer.
This is absurd, especially considering that GCs, Lenders, and Owners are issuing reports and studies left and right about how subcontractors will "accept discounts" to get paid faster! Here, literally, contractors may be forced to pay interest on late payments!!!
Contractors are really stuck with cash pains and payment process headaches. They are aching for help, with 75%+ saying that they want more visibility into how others are being paid on the job, and what the payment timelines are. Contractors are in a tight spot, they are waiting too long for cash, they are cash-strapped, and they are in the dark.