Late payments in construction are not just a subcontractor cash-flow problem. They can influence who subcontractors choose to work with, how they price future projects and how much risk they build into their rates.
Payapps research involving 754 subcontractors across Australia and New Zealand shows just how significant payment performance has become.
Only 8% of subcontractors surveyed said all their progress claims are paid on time, while more than a quarter said payment delays typically last two weeks or longer.
For builders, the implications extend well beyond accounts payable.
Our research found 77% of subcontractors say a builder’s payment reputation influences their decision to bid or price future work, while 57% have increased their rates or added a risk margin because of slow or unreliable payments.
In other words, late payments may eventually find their way back into the price builders pay for subcontracted work.
What late payments mean for subcontractors
Construction businesses operate with significant ongoing costs. Labour, materials, equipment, suppliers and other expenses still need to be paid while subcontractors wait for approved progress claims to reach their accounts.
When we asked subcontractors about the biggest impacts of delayed payments, the top three responses were:
- tighter cash flow;
- increased stress and pressure; and
- greater difficulty paying suppliers.
Those pressures do not necessarily remain contained within one subcontracting business.
Persistent cash-flow pressure can affect relationships with suppliers, the ability to resource projects and ultimately the resilience of the wider construction supply chain.
That is why late payments in construction should be viewed as a broader commercial issue, rather than simply a disagreement about when an invoice gets paid.
Late payments can influence future tender pricing
Perhaps the most important finding for builders is what subcontractors do after experiencing slow or unreliable payment.
More than half — 57% — told us they have increased their rates or added a risk margin because of payment behaviour.
Think about what that means at tender stage.
Builders assess prospective subcontractors on factors including price, capability, capacity, risk and previous performance. Subcontractors are making their own assessment in return.
If previous experience tells them that working with a particular builder is likely to involve chasing payments, carrying additional working capital or waiting beyond agreed payment terms, they may price that risk into their next bid.
Over time, late payments can therefore create a hidden commercial cost for builders themselves.
Conversely, a strong payment reputation can become part of the reason subcontractors want to work with a builder.
Our finding that 77% consider payment reputation when deciding whether to bid or how to price work suggests subcontractors are already making that calculation.
Paying on time should remain the baseline
There is an important distinction to make here. Improving subcontractor cash flow does not mean builders should simply introduce ways for subcontractors to receive money earlier while continuing to make standard payments late.
The first priority should be straightforward: meet the payment terms that have been contractually agreed.
A subcontractor should not need an alternative financing arrangement simply because its approved progress claim has not been paid when promised.
Subcontractors also play a role in keeping the process moving by submitting complete, accurate claims with the required supporting documentation. Our guide to preparing better progress claims to get paid faster and avoid disputes covers practical steps that can help reduce avoidable assessment delays.
Better progress claim management can help by creating clearer visibility over where claims sit in the assessment and approval process, reducing reliance on fragmented emails and spreadsheets, and helping project, commercial and finance teams coordinate around upcoming payments.
But even when builders consistently meet agreed payment terms, subcontractors can still experience short-term cash-flow pressures. That is where another option may have a role.
Where optional Early Payment can help
Our survey found 40% of subcontractors would be interested in an optional early payment arrangement on an approved progress claim, even if it meant accepting a slightly reduced payment amount.
That finding is different from asking builders simply to “pay faster”.
There can be legitimate reasons why a subcontractor occasionally wants access to funds before the normal contractual payment date — perhaps to manage a temporary mismatch between incoming payments and payroll, suppliers or other business expenses.
In those circumstances, giving subcontractors the choice to request earlier payment can provide useful flexibility. The important words are choice and request.
Early Payment should remain optional and transparent. It should sit alongside reliable on-time payment practices, not replace them.
Making early payment requests easier to manage
Early payment requests already happen in construction, but often through emails, phone calls or one-off project arrangements. That can create extra administration and make it harder for builders to maintain consistent oversight.
The Payapps Early Payment feature brings those requests into the existing progress claim workflow. Builders control eligibility, payment timeframes and discounts, while subcontractors choose whether to request earlier payment.
Scott Lockwood, Head of Customer Success at Payapps, said:
“Our Early Payment feature in Payapps changes that by embedding requests directly into the progress claim and approval workflow. It gives builders a practical way to support subcontractor cash flow while maintaining visibility, control and commercial discipline.”
Sarah Constructions is already using Early Payment through Payapps.
“By keeping the process optional, transparent and embedded within our existing Payapps claim workflows, we’re able to support our supply chain while maintaining strong commercial governance across projects,” said Lewis Skittrall, Head of Commercial at Sarah Constructions.
The principle remains simple: paying subcontractors on time should be the baseline. Early Payment provides an additional option for subcontractors who want access to approved funds before their contractual due date.
Payment performance is a commercial issue
The findings from 754 subcontractors show that late payments affect more than cash flow. They can influence who subcontractors choose to work with and how they price that work.
With 77% saying payment reputation influences their decision to bid or price future work, and 57% having increased rates or added a risk margin because of slow or unreliable payments, payment performance deserves to be treated as a commercial and supply-chain issue.
Paying on time comes first. From there, builders can strengthen payment processes and give subcontractors greater flexibility where it makes sense.
