Prompt Payment More Likely on Residential Construction Jobs Than Commercial or Public Jobs
May 2, 2022
2020 Levelset Construction Cash Flow & Payment Report
Residential jobs are more than twice as likely to pay within 30 days than public jobs, but prompt payment is reliant on strong interpersonal skills, according to the 2022 Levelset Cash Flow & Payment Report
In construction, no line of work guarantees prompt and in-full payments, but contractors working on residential jobs say their rate of prompt payment is significantly better than commercial or public jobs, according to the 2022 Levelset Cash Flow and Payment Report. However, the report revealed that residential construction jobs require increased communication to improve the chance of prompt payment when compared to commercial or public jobs.
Contractors working on residential projects are more than twice as likely as those working on public projects to report getting paid within 30 days, with residential construction contractors saying they are paid in 30 days or less 48% of the time and public construction contractors saying that only happens 21% of the time.
Significantly slow payments of 60 days or more are three times more likely on public construction projects than on residential construction projects, according to the survey participants. Residential contractors say it happens rarely, just 6% of the time, while public project contractors say it happens nearly one out of five times (18%).
To ensure prompt payment, a greater portion of contractors working on residential construction projects believe that interpersonal communication and high-quality work, relative to their commercial and public counterparts, are vital to prompt payment. Conversely, a greater percentage of commercial and public project contractors believe that process-related variables play a greater role in timely payment.
| Question: Why do customers pay quickly? | Residential Contractors | Commercial Contractors | Public Contractors |
| Interpersonal communication and quality of work factors | |||
| Responded that "high-quality work" is a cause of prompt payment | 48.3% | 38.1% | 32% |
| Responded that "good communication with customers" is a cause of prompt payment | 45% | 40.3% | 39% |
| Responded that "Setting clear expectations with customers" is a cause of prompt payment | 39.5% | 36.9% | 32% |
| Process-related factors | |||
| Responded that "easy invoicing/paperwork process" is a cause for prompt payment | 30.7% | 37.5% | 32.5% |
| Responded that "good management by the general contractor" is a cause for prompt payment | 18% | 27.6% | 29% |
When asked why customers pay their invoices slowly, emphasis was similarly placed.
| Question: Why do customers pay slowly? | Residential Contractors | Commercial Contractors | Public Contractors |
| Interpersonal communication and quality of work factors | |||
| Responded that "giving in to problem customers too easily/not standing up for ourselves" is a cause of customers paying late | 22.7% | 19.9% | 19% |
| Responded that "customer disputes quality of our work" is a cause of customers paying late | 19.1% | 15.1% | 14.5% |
| Process-related factors | |||
| Responded that "problems with project financing/property owner's cash flow" is a cause of customers paying late | 44.2% | 46.9% | 51.5% |
| Responded that "using our money to improve their cash flow" is a cause of customers paying late | 27.4% | 35.5% | 40.5% |
| Responded that "poor management by the GC" is a cause of customers paying late | 17.3% | 30.1% | 29% |
"Picking the type of construction work you do based on the likelihood of getting paid shouldn't be a thing, but it is the norm," said Levelset CEO Scott Wolfe Jr. "Many contractors needlessly wait more than 100 days to get paid, which often ties up their capital and harms their ability to take on larger jobs. As an industry, we've spent way too long putting up with it because 'that's just how it works.' That mentality must change for us to see real progress."
Although the contractors surveyed may work on different types of projects, they share one major thing in common — their challenges for the upcoming year. Out of 20 different potential challenges, residential, commercial, and public contractors chose the same top five challenges: increasing costs, supply chain issues, the changing economy, staffing, and a potential pandemic hangover. What they were concerned about the least varied significantly between the three groups.
For more information about the report and a detailed summary of findings, please visit: www.levelset.com/survey
About Levelset
Levelset's mission is to empower contractors to always get what they earn. Levelset's products help millions in the construction industry each year to make payment paperwork and compliance easier, get cash faster, monitor the risk on jobs and contractors, and better understand payment processes and rules. The results are faster payments, access to capital, and fewer surprises. Founded in 2012, Levelset is based in New Orleans, Louisiana, with offices in Austin, Texas, and Cairo, Egypt, and is owned and operated by Procore Technologies, Inc. For more information, visit www.levelset.com.
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Original Source: Prompt Payment More Likely on Residential Construction Jobs Than Commercial or Public Jobs
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