Friday, July 6, 2018

Late Payments from Clients Cost Construction Industry $40B Annually

construction business
A report from a construction loan software provider found that
late payments from clients add on 3.3% to total project costs,
or $40 billion a year across the construction industry.

In business, everyone knows you have to spend money to make money. But there comes a point where business owners must decide just how much is too much. In its Construction Payment Report 2018, construction loan software provider Contract Simply found that late payments from customers cost the commercial construction industry $40 billion annually.

The study surveyed 1,300 respondents across the trade and found that 88% of contractors wait longer than a month for payment. Another 46% of contractors cover the gap with business or personal savings and credit lines- which results in extra financing fees. More than 80% of surveyed contractors said they've had to file a lien against a project due to slow payment- which results in unplanned legal fees. Furthermore, late payments prevent contractors from meeting their payrolls and invoice obligations. Altogether, these figures represent an invisible 3.3% add-on to total project costs.

More than 70% of surveyed contractors said they'd be willing to discount their invoices if clients would agree to pay in a month. That would put an estimated $18 billion back in the hands of builders, developers and lenders.

Contract Simply suggested in their report that digital invoicing and payment could speed up the payment process. Traditional routes such as filing liens can create tension between all parties on a project, in addition to be an expensive and slow way to ensure payment.

To learn more about the report, visit Contract Simply. To learn more about project management and how to enhance your business revenue, visit Zack Academy's Business Practices homepage. Zack Academy specializes in online and in-person vocational training solutions- learn more today!

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