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How Construction Site Efficiency Can Reduce Late Payments

How Construction Site Efficiency Can Reduce Late Payments

May 20, 2021

Timeliness is a pervasive issue in the construction industry. Projects frequently run over schedule, and even after completion, payments typically take far longer than they should. These delays can take a toll on smaller, independent contractors’ finances.

A 2019 survey revealed that 43% of American subcontractors wait between 30 and 60 days for payment. Another 30% wait even longer, and the cost of these floating payments represents $64 billion in excess expenses. This is a complex and widespread problem, but you can take steps to alleviate it.

Being more efficient on the construction site can reduce late payments in several ways. Here’s how.

Creating More Time for Payments

The most straightforward way that efficiency reduces late payments is by leaving more time for the billing process. The sooner you finish your work, the sooner you can get paid. Falling behind schedule can cause bills to pile up for your clients, so it takes them more time to get to you.

One of the reasons construction payments are so slow is because of the industry’s hierarchical payment structure. Money goes to property owners and general contractors first before flowing down to various subcontractors. The people at the top of the chain generally want to ensure everything is in order before paying subcontractors, slowing the process.

Construction teams should stay ahead of schedule so there’s more time for this stream to flow. General contractors will be better able to double-check everything before ending up behind schedule. You’ll be more likely to get paid on time as a result.

Coordinating Subcontractors

Another leading cause of payment delays is confusion between the various subcontractors involved in a project. Poor coordination is a common cause of projects running over schedule, which, in turn, affects billing. The longer you run behind schedule, the more likely your payment will do the same.

Improved efficiency can help everyone work together. That’s because when one subcontractor falls behind, it has a domino effect on all the others who have to work after them. If everyone is more efficient, other subcontractors can start working according to schedule, keeping everyone coordinated and preventing delays.

Better communication helps here, too. Timely updates about your progress can help everyone else adjust their schedules accordingly. If all parties maintain a higher level of transparency, projects won’t take as long, and payments can come sooner.

Preventing Equipment Malfunctions

Another frequent source of delays is equipment breakdowns and malfunctions. These issues cause you to fall behind schedule and can also lead to disputes that further delay payments. Adopting a more efficient approach to maintenance can prevent breakdowns, helping you get paid on time.

Part of an efficient maintenance schedule is giving more attention to the most common problems. For example, a vehicle’s undercarriage typically accounts for 50% of maintenance costs, so you should examine it more frequently than other parts. Taking extra care of frequent problem areas will help you prevent breakdowns better.

Equipment maintenance may be something you can do on your own time. If you fix these issues away from the work area, your time on-site will be more productive. Payment delays will be less likely with higher productivity and fewer malfunctions.

Avoiding Disputes

Many payment delays come from disputes over the quality of your work. Clients typically feel they’re not obligated to pay you if they don’t think you’ve provided what you promised. While this is a multifaceted issue, worksite efficiency plays a substantial role in it.

You’ll start to fall behind schedule if you’re not efficient, which can lead to stress. You may then rush to finish sooner, leading to lower-quality work, which causes these payment disputes. If you can operate more efficiently, you won’t feel rushed and can create higher-quality results, preventing conflict.

If disagreements do arise, they won’t have as substantial an impact. Being more efficient will give you more time to fix anything or make adjustments to satisfy clients. You can then ensure arguments won’t delay your payment too much.

Staying Within Estimates

Providing estimates ahead of time can help speed the payment process, as clients can anticipate what they owe. If you have trouble staying within these estimates, though, it can lead to disputes that will delay your compensation. Construction site efficiency will help you avoid going over budget, preventing these disputes.

Delays are one of the most significant factors behind cost overruns. One survey found that time overruns can cost construction companies 20% more than estimated expenses, which would almost certainly lead to disputes. The more efficient you are, the less likely you will fall behind schedule, helping you stay within budget.

If unexpected expenses do arise, you’ll have more time to inform clients if you’re ahead of schedule. Keeping everyone up to date about these costs will help mitigate disputes, so efficient communication is also vital.

Improving Reputation

Being more efficient on the worksite will improve your reputation within the industry. If you frequently fall behind schedule, your reputation will suffer. Clients won’t be as concerned about paying you fairly.

By contrast, building a reputation for efficiency will make you stand out. If you impress customers with how timely you are, they’ll likely return the favor by prioritizing your name when making payments. As your reputation grows, people may put you first automatically before you even finish.

Since the construction industry is infamously slow, it may not take much to impress clients. Even marginal efficiency improvements can have a positive impact on your reputation.

Work Site Efficiency Can Fix Construction’s Late Payment Problem

Late payments can hinder your ability to start new projects and pay your bills. Reducing these is a crucial step in making your business more profitable, and efficiency is perhaps your best tool in improving payment times. The more efficient you can be on the worksite, the swifter the payment process will be.

Improving efficiency is rarely straightforward. If you can find even small ways to optimize your workflows, though, you can see significant results and get paid quicker.

 

This is a guest post from our friends at Renovated