Slow payments in the construction industry result in $40 billion in superfluous costs annually, according to a report released by Contract Simply, an automated workflow solution. More than 40 percent of subcontractors surveyed said they wait between 30 and 60 days for payment, while an additional 46 percent wait 60 to 90 days.
When asked about managing cash flow, 83 percent of respondents stated they have been forced to file a lien due to slow payment, with a majority reporting they have used business savings or a line of credit to float payments to others. For three-quarters of contractors, this meant incremental costs in the form of finance fees and administrative time averaging 3.3 percent of the total project costs, which equates to $40 billion for the industry as a whole.
More than 70 percent of respondents indicated that if construction lenders and borrowers were to offer net 30 payments, they would collectively be willing to provide $21 billion in discounts.
