By Claire Wilson, Siteline

Payment delays cast a long shadow over the construction industry, particularly for subcontractors. Here’s what we know:

• Subcontractors often function as the project’s informal bank, with a staggering 77% reporting they routinely front project costs.
• Yet, consistent payments remain elusive, with only 5% of subcontractors reporting they always get paid on time and most enduring an average 90-day wait.
• These delays create immediate cash flow constraints for nearly half (44%) of all subcontractors.

The reliance on manual, paper-based systems only magnifies these challenges, introducing costly errors and obscuring the status of outstanding payments. Even the most dedicated billing professionals find their valuable time consumed by payment follow-ups rather than strategic work.

Without streamlined systems to identify overdue invoices, collections become increasingly difficult, and revenue suffers. To help you eliminate the productivity bottlenecks within your collections process, here are seven strategies designed to reduce administrative burden, increase efficiency, and significantly accelerate your cash flow.

How to Hack Your Collections Process

The big thing to remember is that an effective collections process thrives on proactivity. Whether navigating the usual speed bumps or surfacing unforeseen red flags, timely action is key to cash flow stability. Here are some tried-and-true strategies to help you achieve that.

1. The “Uphold Fair Payment Terms” Hack

Ensuring you and your team have read, understand, and agree to the contract’s terms is critical. This is because contracts set the tone for when and how subcontractors get paid—these areas in particular:

• Payment Terms: Push aggressively to replace “pay-if-paid” clauses with “pay-when-paid” language, and make sure that the GC-to-subcontractor payment timeline (e.g., net 30, net 45) aligns with your cash flow needs.
• Payment Application Requirements: Confirm all payment application details—from required forms and notarization to submission deadlines and methods. Using the wrong form or failing to get a required signature can hold up payment for months.
• Lien Waiver Details: Familiarize yourself with both the project’s and state’s lien waiver requirements, which contain critical details for protecting your right to payment.
• Retainage terms: Clarify retention percentages, release conditions, and any variable rate structures.

If anything is unclear or unreasonable, speak up early and come to the GC with specific, mutually beneficial solutions.

2. The “Standardize Your Pay Apps” Hack

Reviewing the contract will also guide how you structure your pay application process, ensuring that you’re:

• Using the correct form required by the GC
• Including all documentation required to track progress and justify billed amounts
• Submitting pay apps on time and to the right portal

Nailing these details from the get-go will save your team time, maximize first-time acceptance rates, and reduce delays.

3. The “Mitigate Risk Exposure” Hack

Construction projects rarely go to plan, and change order approvals can be challenging. To minimize risk when project scopes and requirements evolve, make sure that you:

• Always document changes to the original agreement with detailed, written change orders.
• Never do the work before the change order has been approved—this eliminates all your leverage.
• Always ensure project managers (PMs) immediately notify the back office about the change so they can process the request without delay.
• Never skimp on attaching backup materials that support your request for additional funds.
• Consider sending the change order log to the GC every month (what’s been approved, is in progress, or is outstanding) to minimize misunderstandings and cultivate a better working relationship.

Following these to-dos can significantly speed up approvals from the GC, allowing money to reach you sooner, so work can continue as usual.

4. The “Head Off Cash Flow Issues” Hack

Regularly analyzing your accounts receivable (A/R) data is not only essential for maintaining healthy cash flow, but it also allows you to make informed decisions that streamline operations.

For instance, identifying consistently slow-paying GCs allows you to adjust your payment terms or take proactive measures to encourage timely payments. This can prevent bottlenecks that disrupt your projects and lead to unnecessary delays.

Moreover, recognizing which projects yield faster payments enables you to prioritize resources and efforts on them, ultimately maximizing your profitability. By addressing cash flow issues early on, you free up time and mental space to focus on strategic initiatives rather than constantly putting out fires caused by late payments.

5. The “Collectively Collect” Hack

Developing a realistic and clear A/R escalation plan is probably one of the most important components of any subcontractor’s collections efforts. A shared plan gives teams structure and accountability, helping them move money in (and out) as efficiently as possible.

Key elements of an effective A/R escalation plan include:

1. Immediate Response to Past-Due Payments: The longer payments linger, the harder they are to collect. Take action the minute it becomes past due, reaching out to the GC with essential details (e.g., invoice number, the amount due, original payment date).
2. Consistent Follow-Ups: Establish follow-up protocols in case your initial payment request fails. Determine a follow-up frequency, choose your communication mode (i.e., email or phone), and decide when to bring in senior leadership for additional leverage.
3. Defined Roles and Responsibilities: Assessing ownership for each step of the escalation process to reinforce accountability and prevent past-due invoices from slipping through the cracks.
4. Team Alignment: Communicate the process to everyone involved, ensuring they understand their role in securing lingering payments.

6. The “Centralization and Automation” Hack

As I hit on at the start, construction is moving faster than ever, and manual, paper-based billing methods just can’t keep up. Without knowing where their money stands or who’s responsible for following up, subcontractors waste so much time chasing down payments.

These days, there are handy tools that automate the tedious tasks slowing your team down and delaying payments. Key product features for streamlined A/R management include:

• Centralized billing and custom pay app creation
• Pay app tracking across all clients
• Automated email reminders to clients with outstanding invoices
• Built-in collections task management
• Detailed reporting and forecasting functionality for better financial management and planning

By implementing these strategic hacks, you can dramatically reduce the time spent on billing and collections, minimize payment delays, and flip your financial management from reactive to proactive. Remember, in construction, time is quite literally money—every minute saved is a dollar earned.

About the Author: 

Claire Wilson is the co-founder and COO of Siteline, a billing software for subcontractors. Previously, she was a project manager at Tishman Construction in New York City, where she worked on major projects like Hudson Yards and JP Morgan’s Corporate Headquarters. She is an active CFMA San Francisco member, serves on the Bay Area Subcontractors Association board, and has spoken at numerous regional and national construction conferences. Claire holds a BS in Civil Engineering from Bucknell University.