in five homebuilders ( 17 %) say they always get paid on time , they vastly outperform those on government projects ( 7 %) and commercial jobs ( 4 %).
“ The pandemic drove financial uncertainty through the roof and put an extra kink in the flow of cash on projects across the country , “ said Scott Wolfe Jr ., CEO of Levelset . “ Payment delays throttle a company ’ s ability to be competitive , take on new projects , and grow their business .”
After 40 days , one in five construction businesses is cash flow negative , having already paid their subcontractors , suppliers , and other vendors — but still waiting for payment . Forty-seven percent of companies say payment delays reduce their profit , and one in three turn to loans or other financing to bridge the cash flow gap , adding interest and other charges .
To mitigate potential payment issues or to collect payment , contractors report an increase in preliminary notices and mechanics liens . Just over half of companies ( 51 %) send a preliminary notice on a typical project , up from just 29 % in 2020 . Lien claims are on the rise as well , with 71 % of construction businesses filing a lien over non-payment in 2020 , a 22 % increase from 2019 .
Construction companies also report investing in other solutions to help speed up payment . Some of the findings include :
■ 83 % of construction businesses have the ability to accept electronic payments and 79 % say it has helped their company get paid faster .
■ Companies using software for tracking and processing payments grew 113 % year-over-year .
■ Software for payment paperwork is up 67 % since 2019 .
■ Just 8 % of construction companies say they don ’ t use software at all — down from 21 % in 2019 .
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