By Claire Wilson, Siteline

The construction industry has a persistent challenge: getting subcontractors paid on time. Sound familiar? Given that only 5% of trade contractors report always getting paid on time—with most waiting an average of 90 days to get paid—delayed payments are an all-too-common frustration.

This challenge partially stems from where subcontractors sit in the payment chain: first to front the project’s costs, yet last to get paid. Fortunately, there are some proven strategies to accelerate cash flow, with modern, construction-specific technology leading the way. 

This article will explore why the current payment status quo must change and how new technologies are revolutionizing how subcontractors track and collect payments, ultimately giving themselves more control of their financial future.

The Hidden Costs of Passive Collections

The construction industry has long struggled with complex payment structures trapped in outdated, paper-based systems. As a result, subcontractors are forced to manage a maze of payment terms, schedules, and deadlines scattered across disconnected spreadsheets and folders. 

This manual, fragmented process creates several interconnected challenges that directly impact payments and collections:

1. Communication breakdowns: Disconnected systems lead to information silos, causing confusion about payment status and collection efforts.
2. Documentation nightmares: Nearly 25% of construction companies struggle with missing invoices or pay applications, transforming payment collection into a frustrating “he said, she said” game where hard-earned money hangs in the balance.
3. Visibility gaps: Without clear insight into payment processes, subcontractors are left flying blind—unable to accurately forecast cash flow or confidently pursue new project opportunities.
4. Increased risk exposure: Spreadsheets are breeding grounds for errors. A single mistyped digit or incorrect formula can throw off an entire pay application, delaying payments and potentially straining critical client relationships.
5. Diminished returns: Time is quite literally money in construction collections. Research reveals that invoices 90 days past due retain only 70% of their original value, with businesses typically writing off 4% of accounts receivable annually as bad debt.

These individual challenges compound into inefficiencies that ripple across team performance. According to a 2020 Levelset report, construction companies lose over a day of work weekly due to inefficiencies, with 80% spending considerable time chasing payments. On top of this, McKinsey research shows construction productivity has grown only 0.4% annually from 2000 to 2022, compared to the economy’s 2% growth—a lag that could slow workforce output by $40T by 2040. 

The takeaway? Adopting technology is now critical for the industry to remain competitive globally.

Tech Tools Transforming Construction Payments

The construction software market is experiencing a remarkable evolution. In recent years, businesses have invested approximately $10 billion in construction software, with over 80% of companies now adopting technology to streamline their processes. This technological surge has attracted an impressive $50 billion in technology investments from 2020 to 2022.

Accounting Software

Specialized accounting software has emerged as a game-changer, with purpose-built tools designed specifically for construction finance. These solutions go beyond traditional accounting platforms, offering features that automate data sharing, streamline billing operations, and provide real-time insights. In fact, 25% of US construction companies are planning to increase their investments in such specialized software.

Enterprise Resource Planning (ERP) Systems

ERP systems represent another critical technological advancement. Unlike traditional accounting software, these platforms provide a holistic view of business operations, integrating multiple functions, including project management, accounting, and resource allocation. By connecting these different areas, ERPs provide a centralized platform for managing the entire construction organization, improving efficiency, collaboration, and decision-making.

Specialized Point Solutions

Despite the power of traditional accounting and ERP software, these platforms often leave critical gaps in subcontractors’ financial workflows. Recognizing these limitations, many subcontractors are now embracing a hybrid approach—pairing their accounting software with specialized solutions that target specific financial challenges (e.g., lien waiver management, change order tracking, custom pay app submissions).

This evolution represents an important shift in construction financial management—one that empowers subcontractors, the financial backbone of most projects, with the tools to master their cash flow.

Key Features of Construction Collections Tools

Not all software is created equal. Before investing in a new system, subcontractors must understand exactly what tools will move the needle on their collections process. If the goal is to streamline payments and fortify your cash flow, below are the features that separate great solutions from just good ones.

1. Real-time payment tracking: Provides immediate visibility into invoice statuses, allowing subcontractors to accurately track payments, forecast cash flow, and quickly identify potential payment delays before they become bigger financial issues.
2. Automated client email reminders: Reduces manual follow-up work by automatically scheduling reminder emails at different stages of invoice aging, ensuring consistent communication and increasing the likelihood of timely payment collection.
3. Built-in tasking: Establishes clear accountability by assigning specific roles and responsibilities for each stage of the collections process, preventing past-due payments from being overlooked and creating a structured approach for recovering them.
4. Centralized communication: Creates a single source of truth for all payment-related conversations, enabling team members to quickly access information, resolve disputes, and maintain a comprehensive audit trail of collection efforts.
5. Real-time reporting: Offers instant insights into A/R aging (by project and in total), GC payment histories, and potential financial anomalies, allowing subcontractors to make proactive financial decisions and maintain transparent communication with clients.

Selecting the Right Solution

Beyond basic functionality, organizations should evaluate how well a software solution aligns with their specific needs. Here’s a breakdown of essential considerations:

1. Know what’s needed: Companies must thoroughly understand their specific problems before investing in software. This involves creating a comprehensive list of must-have and nice-to-have features, and gathering input from each person (or team) who will use the software to ensure alignment and buy-in.
2. Set a budget: Financial considerations are paramount when selecting accounting software. Annual subscription fees can vary dramatically, from a few thousand to tens of thousands of dollars, so organizations should meticulously match their essential requirements with the correct pricing tier to avoid overpaying for unnecessary features.
3. Ask the right questions: The selection process requires comprehensive due diligence and strategic questioning. Organizations should invite key stakeholders to participate in the evaluation, identify specific problems the software will solve, attend demos with prepared questions, and research customer experiences through case studies and testimonials.
4. Don’t overlook security: Given the dramatic increase in data breaches (800% from 2019 to 2020), security must be a top priority when selecting accounting software. Companies need to thoroughly understand the provider’s approach to data protection and security protocols to safeguard financial information.
5. Understand support offerings: Companies should work with their software provider to understand what support is provided during implementation, the fees (if any) that are associated with training (and support thereafter), what’s expected of their team, and how data migration will be handled.
6. Determine integration needs: Companies should assess how the new software will connect with existing systems like accounting platforms, ERP systems, CRM tools, bid management software, and payroll systems to ensure smooth, integrated functionality.
7. Create an implementation plan: A structured approach to introducing new software can significantly impact its success. This involves documenting a realistic timeline, establishing a change management team, defining clear key performance indicators, customizing training programs, potentially conducting a pilot test, and preparing for data migration and system integrations.

The Bottom Line

In today’s competitive construction landscape, technology is transforming the way subcontractors manage collections. Purpose-built software solutions offer a multitude of benefits, from increased efficiency and reduced risk to improved cash flow and greater financial decision-making. Moreover, by automating tedious tasks, these solutions give overstretched back-office teams much-needed time back in their day, allowing them to focus on more strategic initiatives.

Ultimately, leveraging technology for collections is no longer optional—it’s essential for empowering subcontractors to thrive in a rapidly evolving market.

About the Author:

Claire Wilson is co-founder and COO of Siteline, the only pay app and lien waiver management software for trade contractors. Previously, Claire was a project manager at Tishman Construction in New York City where she worked on monumental projects including Hudson Yards and JP Morgan’s Corporate Headquarters. She has a BS in Civil Engineering from Bucknell University and now serves on the board of the Bay Area Subcontractors Association (BASA).