PAY-WHEN-PAID COSTS YOU REAL MONEY. HERE'S HOW MUCH.
Pay-when-paid clauses in commercial subcontracts make GC payment timing contingent on owner payment, which pushes the owner's payment delay risk down onto the subcontractor. On $4M in annual subcontracts under net 60 pay-when-paid terms, the annual financing cost of delayed payment runs $40,000 to $80,000, absorbed silently. The fix is a pay-when-paid markup added to every bid, lien rights preserved from day one, and a 13 week cash flow forecast that maps the payment delays into planning so they stop being surprises.
The reason this cost stays invisible is that it never gets its own line anywhere. It sits in no job cost code, in no overhead line, and in no variance against a bid. It comes out as interest on the line of credit, or as the opportunity cost of money sitting in receivables instead of funding the next mobilization. That's why most subcontractors can feel it without being able to point at it, and why the first step is arithmetic rather than negotiation.
WHAT IT MEANS.
A pay-when-paid clause is subcontract language that makes the GC's obligation to pay you conditional on the GC first receiving payment from the owner, which moves the owner's payment delay risk onto you.
Unlike a change order for changed conditions or a delay claim for owner caused delays, the financing cost of a pay-when-paid delay is almost never recoverable. It gets absorbed into operating cash and eventually surfaces as the unexplained distance between the profit on the P&L and the balance in the bank account.
The exposure compounds across the portfolio rather than sitting on one job. Four active jobs under pay-when-paid terms with four different GCs means four independent owner payment risks running at the same time, and if two of those owners are slow in the same month the combined delay can create a cash crisis in a business performing well on every job.
WHERE THE MONEY GOES.
You fund the owner's slow payment
The owner is 45 days late paying the GC, so the GC is waiting. Your crews already worked and your material was already purchased, which means you're funding the owner's payment delay out of operating cash or the line of credit, at your cost of capital. The subcontract pays you nothing for that, because pay-when-paid made it your contractual responsibility.
The cost is never recovered
A change order recovers changed conditions and a delay claim recovers owner caused delays, but the financing cost of a pay-when-paid delay recovers nothing. It gets absorbed into operating cash without ever being billed to anyone. Eventually it surfaces as the unexplained distance between the profit on the P&L and the money in the account, which is the thing most subcontractors can't put words to.
It compounds across all active jobs
A subcontractor with four active jobs under pay-when-paid terms with four different GCs is carrying four independent owner payment exposures at once. If two of those owners run slow in the same month, the combined delay can create a cash crisis even though the business is performing well on every single job. The risk is in the portfolio, not in any one contract.
WHAT IT LOOKS LIKE IN DOLLARS.
Total annual billings under pay-when-paid subcontracts, multiplied by the average payment delay beyond 30 days, multiplied by your cost of capital, either the line of credit rate or the opportunity cost. Worked out: $4M in billings, a 30 day average delay beyond net 30 terms, and 8 percent cost of capital gives $4M times 30 divided by 365 times 8 percent, which is $26,300 in annual financing cost on that delay alone. Add the months where the delay runs past 30 days and the number grows quickly.
On a $500,000 subcontract with net 60 payment terms, in a pay-when-paid scenario where the owner pays the GC in 90 days, you wait 90 days or more for payment on work that cost you cash from day one. At 8 percent annual cost of capital, 30 extra days on $500,000 is $3,333. That's one job and one month, and nobody bills it to anybody.
On a year of work, a contractor doing $4M in subcontracts under pay-when-paid net 60 terms might carry $40,000 to $80,000 in annual financing cost that's never recouped from the GC. That range is the whole argument for the markup. It's real money leaving the business every year with no line item attached to it.
FOUR MOVES THAT CHANGE THE MATH.
Take total annual billings under pay-when-paid subcontracts, multiply by the average payment delay beyond 30 days, and multiply by your cost of capital. At $4M in billings, a 30 day average delay beyond net 30, and 8 percent cost of capital, that's $26,300 a year on that delay alone. Until the number exists, there's nothing to price into a bid.
The markup converts your average payment terms and your cost of capital into a percentage that goes on top of the bid. A GC whose owner typically pays in 75 days on net 30 subcontracts earns a 1.5 to 2 percent markup on your bid, invisible to them as a line item and visible to you as the margin that covers your financing cost. Use it on every bid under pay-when-paid terms, not just the long ones.
Preserving lien rights is the strongest protection against pay-when-paid risk turning into outright non-payment. A preliminary notice, or a notice to owner depending on your state, filed early in the project puts the owner on notice of your lien rights and tells the GC you're paying attention. It doesn't mean you'll file a lien, it means you can, and that distinction changes how promptly payment comes in when it runs slow.
Before signing, ask for a provision that caps the pay-when-paid delay: the GC pays within 30 days of receiving payment from the owner, but in no event later than a set number of days from the date of your invoice. That converts pay-when-paid from an unlimited delay risk into a bounded one. Many GCs will accept it, because they want their subs funded well enough to finish the job.
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, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
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.
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 rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
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 job costing.
FREQUENTLY ASKED.
