Contractor’s Guide to Ensuring You’re Paid In-Full and On-Time


You work hard on the job, only to risk not being compensated. Your job as a contractor is already fraught with risk from various avenues – the last thing you deserve is to be at risk of not being paid in full and on time. Payment delays, however, are common in the industry, causing cashflow issues and the inability to pay others, such as subcontractors, in addition to your own bills.

Here are several strategies you can use to reduce the risk of late or no payments, as well as ways to deal with them when they do occur.

  • Discuss cost estimates and budgets with your client during the initial phase of the project and make sure you are transparent. Be very clear that you are providing estimates for labor and materials and pricing may change as the project unfolds, based on supply availability and delays and any unexpected occurrences that could impact the cost of the work performed. Keep your client continually updated.
  • Make sure your contract agreement with the client clearly outlines the cost of the project and payment due dates, methods, and terms and conditions. Include:
    • Agreed-upon cost estimates and a detailed breakdown of each
    • Payment schedule – detail when each payment should be made, based on agreed-upon dates and/or project milestones
    • Materials and equipment list – specify the materials and equipment needed to complete the job, their respective costs, and which party will be responsible for each expense
    • Add-ons and exclusions – itemize possible add-ons the client may request and their cost estimates
    • Any fees for late payments and the course of action you will undertake if payments are not received on time
  • Consider increasing your upfront down payment, particularly for new clients, as part of your terms.
  • Send detailed invoices to the client to avoid any confusion or red flags. Should a dispute arise, a detailed invoice will help support your expenses.
  • Send the client gentle reminders via post or email, stating that the bill is past due and that the late payment fees outlined in the contract will apply.
  • Send the client a preliminary payment demand notice (prior to filing a mechanic’s lien). If you haven’t received payment after several communications or you’ve been advised by your client that he or she will not pay for the work you performed, send a payment demand letter. The letter should specify the monies owed and payment method. Have your attorney review the letter.
  • File a mechanic’s lien on the construction property. Mechanic's liens, which are recorded in public records, can cause problems for property owners. A lien makes it extremely difficult for a client to sell his or her property until the debt is paid in full. Banks and lenders are also unwilling to refinance homes or lend against lien-encumbered properties.

A solid contract will help ensure that projects go smoothly and you and your subcontractors are paid fair and square for your hard work.

Sources: CCIS Bonds, Nolo, AIA