NEW ORLEANS--(BUSINESS WIRE)--Over the past 20 years, the construction industry has become synonymous with delayed payments. Contractors juggle inflated project costs and delayed completion times, and subcontractors are forced to file legal disputes and face cash flow difficulties, both of which can be crippling for their business. To gain more insight into the impact of delayed payments have on the construction industry, Levelset partnered with TSheets by QuickBooks to survey over 500 U.S. contractors, subcontractors and suppliers. Based on their findings, Levelset released the 2019 National Construction Payments Report.
According to the survey, about 50% of respondents reported they do not get paid on time, leading to critical cash flow issues. The payment process for construction projects is complex and is plagued by various issues such as complicated paperwork and bad practices on retainage - where payment can be held past completion of the entire project. In many cases, survey respondents reported delayed payments have forced them to tap into personal funds to keep jobs operational or provide supplies. Additional findings from the survey include:
- 42% of contractors say that they pay partners before they get paid by customers. To help with cash flow, they give concessions on money they are owed, such as discounts, flexible payment options, and interest-free late payments.
- More than half the respondents (58%) have filed a mechanics lien and almost all (98%) have had to threaten to file a lien in the past. The main reason (48%) respondents said they do not file a lien is because they do not want to lose a customer.
- Over half of respondents (60%) reported 5-10% of payment held as retainage on the majority of jobs.
While state laws generally note that contractors must pay their partners as soon as they themselves are paid, it's very difficult for sub-tier parties on projects to know when payments further up the chain are actually being sent. 75% of survey respondents reported wanting more visibility into how others are paying people on their job, indicating a need for increased transparency and collaboration among all stakeholders. Without this assurance of payment, subcontractors and suppliers are often forced to dip into their personal funds to keep jobs operational, take out loans, or in the case of one respondent, layoff their entire staff due to inability to meet payroll.
“The idea that it is acceptable to withhold or delay subcontractor or supplier payment to protect yourself is a deeply rooted idea in the construction industry. This practice has gone on far too long,” said Scott Wolfe, Jr., CEO at Levelset. “We believe that everyone has a right to be paid what they earn in a reasonable timeframe. Through this survey, we hope to increase awareness around the significance of this problem impacting every stakeholder through the payment chain, and encourage industry-wide visibility, communication, and collaboration.”
Through its proactive payment management solution, free online resources, and support team, Levelset encourages transparency at every stage of the payment process and ensures contractors and suppliers have the tools they need to be rightfully paid for their work.
Levelset helps over 500,000 contractors and suppliers with the support, insights, and knowledge they need to ensure payments are under control. Through its cloud-based platform, Levelset users can easily exchange payment documents like lien waivers, pay applications, and preliminary notices. By providing complete visibility into who is on their job, along with faster payments and fewer surprises, Levelset is helping those in the construction industry never lose a night’s sleep over payment. Headquartered in New Orleans with offices in Austin and Cairo, Egypt, Levelset is venture-backed by S3 Ventures, Altos Ventures, and Brick & Mortar Ventures. For more information about Levelset, visit www.levelset.com or call 866-720-5436.