PAY-WHEN-PAID MAKES YOUR CASH THE OWNER'S TIMING.
In most states a pay-when-paid clause is enforceable and can delay your payment by 60, 90 or 120 days. Add the days the owner has to pay the GC to the days your subcontract gives the GC to pay you, and the total is your payment date. On $4M of annual subcontracts under net 60 terms the financing cost is $40,000 to $80,000 a year, so it belongs in the bid.
Net 30 terms take 45 to 55 days to collect, and pay-when-paid terms take 75 to 90. Pay-if-paid is stricter still: if the GC is never paid, you are never paid. Ask for a cap on the wait and for the owner's credit risk to be removed from your contract, or price the carry at 1.5 to 3 percent on the next bid. The guides in this hub cover the clause, the date, the cost and the escalation order when a GC goes slow.
WHAT IT MEANS.
A pay-when-paid clause makes the general contractor's duty to pay a subcontractor depend on the general contractor receiving payment from the owner, which moves the owner's payment delay onto the subcontractor's cash.
WHY IT BREAKS.
Your Payment Date Is Math
Three numbers set it: the day the prime contract requires your GC to invoice the owner, the days the owner has to pay, and the days your subcontract gives the GC after receipt. If the GC invoices on the 25th, the owner has 30 days and your subcontract says 10, your money is due 40 days after the 25th.
The Delay Has a Price
Capital deployed between mobilization and first payment costs interest when it comes from the line of credit. On a 16 month job with a 65 day payment cycle that cost is $15,000 to $25,000, and on a $600K job a $4,800 carry is 0.8 percent of the bid. Most bids absorb it as overhead.
A Slow GC Has an Order of Escalation
A third of slow pay is a pay app the GC can reject, so verify your own paper first. Then work a collections cadence, protect your notice deadlines, and use suspension rights last. Followed in that order, the four steps recovered $365K from one slow GC.
EVERYTHING ON THIS SUBJECT.
Every guide below is a full page on one part of this subject. Start at the top if the whole thing is new; jump to the one that describes your week if it's not.
- Pay When Paid ClauseHow the clause differs from pay-if-paid, what $200K outstanding for 90 days costs at 7 percent, and the language worth negotiating before you sign anything.
- Pay When Paid Payment DateYour prime contract sets the day the GC invoices the owner and how long the owner has to pay.
- Pay-When-Paid Financial ImpactWhat a pay-when-paid clause costs a subcontractor in financing every year, how to calculate your own number, and the bid markup that covers it.
- Slow-Paying GC OptionsA third of slow pay is really a rejectable pay app.
- Payment Terms NegotiationNet 30 takes 45 to 55 days in AR, pay-when-paid takes 75 to 90.
- Working Capital Cost in BidsAverage capital deployed times your LOC rate divided by twelve, per month of the job.
- How to Collect Money OwedMost lien filings produce payment inside 30 days.
- Protect Lien RightsPreliminary notice windows last 20 to 30 days from first furnishing.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing and no payroll.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
You stop touching the books.
Everything in Core, and we do the bookkeeping and the controllership as well. Your office stops answering coding questions and stops fixing a reconciliation that will not balance on the last day of the month.
We do the books. No payroll.
Every job shows its margin while it is still open.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the books, the job costing, and the software. No payroll.
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