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Subcontractor Payment Terms

3K views 31 replies 22 participants last post by  enochmcd 
#1 ·
Hi folks -- hopefully an easy question. Today we pay our subs after we receive their invoice, verify the work, and get their signed conditional lien release. This generally takes about 30 days on average, which doesn't feel crazy, but I'm curious how others handle their time-to-pay.

Thanks
 
#12 ·
The day the rough is inspected and the day the finish is inspected. Subs are not a bank and shouldn't wait for a "GC" to get paid. I've paid subs in full before a job starts because another GC isn't paying. Guys that work on my jobs know how we roll, last thing to worry about is getting paid. Now miss something on an inspection, that gets fixed yesterday.
 
#14 ·
Depends on the sub I suppose...drywall and roof guys want paid the minute the last thing is in the truck or before. If I want to be on their 'quick payer' list then I make sure they're paid up so I'm on the up and up with them! My plumbing & HVAC outfit sends me a bill, they're a bit bigger than some so sometimes it takes me a month or two to even get the bill!
 
#15 ·
We were a pretty large operation, but we paid subs when we got paid by the client. Subs were to submit monthly draws based on percentage of completion by a certain date, which allowed us a few days to assemble the whole monthly invoice for the job and bill the client. Soon as the client paid our monthly bill we paid the subs their draw.

Many clients had 45 or 60 day payment terms, so first draw took a little longer, but then we stayed on a monthly rotation after that. Believe it or not, one of our biggest difficulties was getting subs to bill us in a timely fashion each month. Wasn't unusual to have to call them up and demand they get their invoices in by the end of the day or they would be at the mercy of whatever we estimated their completion percentage was.

At close out you had to turn in your as-builts, any warranty info, lien release, etc. to get the final payoff.

Some of the big clients also held 5-10% retainer out of each bill as sort of an insurance policy that they would still be holding some of our $$ at job end, using it for leverage if things were not to their satisfaction. If the client held retainer, then we held retainer also on sub draws.

System works very smooth for subs that have a little office staff and are sophisticated enough to do a good job with their accounting and billing practices. Had to hold the hands of many little mom & pop subs and work them through the system.
 
#17 ·
If I have an invoice by 5:00 on Wednesday, we write the check and mail on Saturday.

We used to be less formal, but it was a PITA paying someone on a daily basis. My guys are good with waiting a few days - they're all successful. Just knowing the expectation relieves a lot of tension. We set and live up to the expectation.
 
#20 ·
We pay net 30 of invoicing minus builders lien holdback (the law here in Canada). That said we have the choice to pay early, and do make custom arrangements for some subs that simply cannot afford to wait the 30 days. We have NEVER had an issue or complaint and most subs love working for us. The key to it all though- make it very clear up front what the agreement is on both parties side. The subs should never be surprised with the payment arrangements as they should be discussed and agreed upon up front.
 
#22 ·
My subs want 100% before they even step foot on the job... I'd prefer to pay them 100% after their 1 year warranty is up... :laughing:

Seriously we usually pay our guys right away and not much longer than one week depending on many of the items already mentioned.
 
#25 ·
30 days seems fast after doing contracts for restoration companys. If I bill on the 2nd of the month I won't see a check till the end of next month. Could be almost 60 days. Also no deposits.
I play the game and do those contracts at the end of the month. I add 10% to my estimates to payself for financing the job.
It's a good schedule filler and when the checks start to come in it's not so bad. Steady flow of income with an extra %10 and I never have to collect.

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#26 ·
Hi folks -- hopefully an easy question. Today we pay our subs after we receive their invoice, verify the work, and get their signed conditional lien release. This generally takes about 30 days on average, which doesn't feel crazy, but I'm curious how others handle their time-to-pay.



Thanks
What kind of projects are we talking here?

It will be a cold day in hell you string me out 30 days on a 30 sq residential roof....especially if you want me to do another one next week.

Now then, if we are talking a 500 sq commercial flat roof 30 days is a decent turn around time.
 
#31 ·
My guys turn in a signed PO of a verified completion (by me; day of them saying job and we final walk together) by 1400hrs Wed, they’re paid the same week Friday.

My guys are well taken care of, well respected, and thankfully have steady work at strong prices in a stronger market, keeping them loyal. Their families are taken care of well. End result is happy high-quality producing skilled trade professionals who keep my quality standards well above board with little to no supervision.

I do zero production new construction so waiting weeks and sometimes months for builders to pay multiple invoices is a thing of the past.

Keeping positive cash flow and heavy liquidity added to a minimum 50% draw on retail contracts saves any stress and headache. And not making a $1k/month on a brand new diesel something or other doesn’t hurt either.

My two cents.


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