Subcontractors are the lifeblood of most construction businesses. When you pay your subs on time and without the hassle, you become the first person they call when a new job opens up. But for many general contractors, managing those payments is a constant source of stress.
The Payment Schedule: Transparency is Key
The #1 cause of conflict between GCs and subs is a lack of clarity on when and how payments will happen. Be upfront in your subcontract: Is it a weekly draw? Net 15? Pay-when-paid? Whatever your model is, make it clear and stick to it religiously. A sub who knows they'll get paid every Friday is a sub who will show up when you need them.
Documentation: Protect Yourself and Your Sub
Never pay a sub without proper documentation. This means a signed subcontract, current insurance certificates (W-9, liability, workers' comp), and a lien waiver for each payment. Digital tools make this easy—by keeping your project files organized, you can verify that all boxes are checked before you even hit 'send' on a payment.
Automating the Flow
The days of hand-writing checks on the hood of your truck are over. Using modern payment systems—integrated with your estimating and proposal tool—allows you to track what's been billed and what's still pending. This prevents overpayments and ensures your project's cash flow stays balanced.
Key Takeaways
- Clear Terms: State your payment schedule clearly in every subcontract.
- Strict Compliance: Always verify insurance and get lien waivers before paying.
- Communication: If a payment is going to be late, call your sub immediately.
- Use Technology: Automate your payment tracking to reduce errors and save time.