Why Your Construction Payment Practices Build or Break Trust (And How to Get it Right)

If you’re following “standard” construction payment practices, you might be doing your subcontractors a disservice and shortchanging your construction company’s growth as a result.

On average, general contractors (GCs) think their subcontractors get paid in about 30 days, per Billd research. In reality, the typical span from submitting a pay application to receiving payment is a whopping 56 days for subs. In fact, more than two-thirds of subs say slow pay from GCs impacts their business and creates cash flow instability.

In this guide, we’ll explore why subcontractor trust and payments go hand-in-hand and cover practical steps that will put you on the path to stronger construction payment practices and trust.

Trust is a Business Asset in Construction

Trust might not appear on a balance sheet, but in the construction industry, it functions like one of your most valuable business assets. Every bid won, contract signed, and project delivered depends on it.

Broken Trust Comes at a Cost

When trust breaks down between general contractors and subcontractors, the financial and operational costs can be substantial. Construction projects rely heavily on sequencing. One delay can cascade through multiple trades and push deadlines further out. A single missed payment or dispute can quickly erode collaboration. Because of this, general contractors may face:

• Service Level Agreement (SLA) Issues: If subcontractors lose confidence that payments will be timely or change orders will be honored, they protect themselves by padding future bids or limiting their availability.
• Increased Legal Costs: Contractor and subcontractor disputes over retainage or unpaid balances often escalate into litigation, adding thousands in legal fees and consuming valuable time that could be spent on new projects.
• Reduced Workforce Productivity: When teams worry about payment, morale drops, productivity suffers, and safety incidents often rise.

Delays and Disputes Damage Long-Term Relationships

Construction is built on repeat partnerships. A general contractor who consistently communicates, pays on time, and handles disputes transparently becomes a preferred client. On the other hand, those with a track record of delayed payments or withheld retainage gain reputations that travel quickly through local networks and online contractor forums.

Subcontractors talk, and their word carries weight. When trust is broken, rebuilding it can take years. Even if a contractor resolves an issue, the lingering doubt can affect future collaborations, as subcontractors may prioritize other projects, limit scope, or demand stricter terms.

Trust is a Competitive Differentiator

In competitive bidding, pricing matters, but reputation often tips the scale. A general contractor known for integrity, fairness, and reliability can attract stronger bids and higher-quality subcontractors. Subcontractors prefer to work with teams that value partnership because predictable relationships mean predictable income.

For owners and developers, trust translates to lower project risk. A reliable contractor reduces the likelihood of mid-project disruptions, budget overruns, or public disputes, all of which reflect poorly on the project as a whole.

As a result, trust becomes an unseen but powerful differentiator. It enhances your ability to retain skilled labor, secure repeat contracts, and maintain smoother project pipelines.

Poor Payment Practices Create a Ripple Effect

Payment practices set the tone for the entire construction ecosystem. When funds move predictably, everyone, from suppliers to subcontractors, can perform at their best. But when payments are delayed, the effects spread quickly and touch every corner of a project.

Subcontractors and Suppliers Bear the Brunt

Subcontractors and suppliers often operate with tight margins and limited reserves. In fact, three-quarters say they pay out of pocket for materials before receiving payment, Billd surveys reveal. They depend on steady cash flow to pay labor, purchase materials, and manage insurance and equipment costs. When payments are delayed, they are usually the first to feel the impact.

Over 80 percent of construction businesses say they have had to wait longer than 30 days for payment, even though their invoices were due sooner, PBMares reports. For small and mid-sized subcontractors, that gap can be the difference between maintaining operations or halting work altogether.

These challenges can result in:

• Material Shortages: Suppliers may refuse to release additional materials until prior invoices are paid, causing immediate work stoppages.
• Labor Retention Challenges: Cash flow uncertainty forces subcontractors to delay payroll or reduce crew sizes, leading to missed deadlines and higher turnover.
• Financing Strain: Businesses often rely on personal credit cards, lines of credit, or high-interest loans to bridge gaps, increasing their financial vulnerability.

Financial Strain Leads to Job Site Delays and Lower Quality

When there’s a late payment, construction risks, like stress on the job site, increase. Subcontractors focus on survival rather than performance. Corners can be cut unintentionally as teams scramble to meet schedules with fewer resources. Equipment may go unmaintained, and experienced workers may leave mid-project for more stable opportunities.

Delays compound fast. A single unpaid invoice from the general contractor can slow or stop multiple trades, pushing the entire project timeline back. Developers and owners then face their own financial strain from carrying costs, missed tenant deadlines, and reputational fallout.

Payment Disputes Create Additional Legal and Reputational Risks

Payment disputes are costly and public. Even when disputes are resolved, the record of nonpayment remains visible to future partners and lenders. Risks include:

• Mechanics Liens: Subcontractors have legal rights to secure payment through liens, which can delay closings and tie up financing for months. More than half of all contractors say they’ve leveraged them to get paid, per Levelset surveys.
• Breach of Contract Claims: Repeated payment failures can lead to litigation and termination of contracts, jeopardizing current and future projects.
• Reputational Damage: In an industry where referrals and reputation drive business, a history of late payments can exclude contractors from bid lists or disqualify them from public projects.

How to Build Reliable Construction Payment Systems

Reliability in payment is the backbone of every successful partnership in construction. You can have the best crew, the strongest materials, and the most efficient project management tools, but if payments are inconsistent or unclear, the entire operation will become unsteady. Reliable payment systems bring structure, predictability, and trust to an industry that often operates on thin margins and tight timelines.

Set Clear Pay Schedules and Contract Terms from Day One

Reliable systems start long before the first invoice is issued. A solid agreement outlines:

• Detailed Payment Schedules: Contracts should specify milestones tied to measurable deliverables, such as completed phases or inspection approvals, rather than vague progress points.
• Transparent Retainage Terms: Clearly state the percentage to be withheld, the conditions for release, and the timeframe for payment after completion to prevent confusion and unnecessary disputes later.
• Change Order Clarity: Every alteration in scope, materials, or schedule should automatically trigger a documented change order with adjusted payment terms.

Leverage Construction Factoring to Meet Payment Commitments

Even when the intent is good, cash flow gaps can still disrupt payment timelines, especially when project owners or general contractors delay disbursements. Construction factoring can provide stability.

Under traditional factoring agreements, you’ll submit an invoice to a factoring company and directly receive most of the invoice’s value right away. The cash can then be used in whatever way suits your business best, whether that’s covering your own upfront costs, managing payroll, or ensuring subs receive timely payments. However, if your primary concern is ensuring subcontractors receive timely payments, Construction Quick Pay is a better fit.

Quick Pay Allows Subcontractors to Accelerate Payment Under Your Direction

When you participate in a Quick Pay program, like one that Viva Capital offers, you’ll still submit the invoices to the factoring company. However, you’ll also designate specific subcontractors who can qualify for early payments. When a subcontractor chooses to take advantage of it, they simply request payment through the online portal. Then, you choose whether to approve the advance and how much the sub receives.

In this setup, the subcontractor receives payment quickly, and the account is settled when your client pays. While the subcontractor does pay a small fee for the service, he also has control over when to request advances, which makes it easier to manage costs. Moreover, having subcontractor funding locked in this way allows him to move forward with confidence, plus keeps your projects on track.

Have Communication, Documentation, and Dispute Resolution Protocols

Even the most reliable systems will face occasional friction. To prevent and address it, ensure you have:

• Open Channels: Keep subcontractors, suppliers, and clients informed about payment status and delays before they have to ask. Making a proactive call or sending an email can defuse frustration before it turns into conflict.
• Comprehensive Recordkeeping: Store all invoices, approvals, and payment confirmations in a centralized system that can be easily referenced by both parties.
• Defined Dispute Procedures: Include clear steps in every contract for how disagreements will be handled, from initial notification to mediation or arbitration. A documented process protects everyone’s interests and ensures fair resolution.

Trust-Based Relationships Strengthen the Supply Chain

Construction supply chains are intricate, and contractor payment relationships sit at the heart of them. Every project depends on a web of subcontractors, suppliers, transporters, and service providers moving in sync. When trust anchors those relationships, projects run smoother, costs stabilize, and unexpected disruptions are easier to navigate. Reliable payments are central to that trust. They signal dependability, professionalism, and respect for the people who help your projects succeed.

Consistent Payment Builds Loyalty with Trade Contractors

Predictability allows you to build trust with trade contractors. When your company pays consistently and communicates openly, they can plan their labor, order materials with confidence, and commit to your future projects without hesitation. This helps ensure you receive:

• Increased Availability: Reliable payers are prioritized when schedules are tight or projects overlap.
• Greater Flexibility: Loyal subcontractors are more likely to accommodate short-notice changes, overtime needs, or adjusted timelines.
• Quality Commitment: When crews feel respected, they put more care into their work, resulting in higher-quality outcomes and fewer rework costs.

Trusted Suppliers Offer Better Pricing and Priority

Suppliers operate with similar motivations. Their willingness to offer favorable terms or fast turnaround depends largely on your payment behavior. A contractor with a dependable payment record often receives early access to materials during shortages and competitive pricing that improves profitability. You’ll likely benefit from:

• Preferred Customer Status: Suppliers frequently prioritize customers who pay promptly, ensuring you receive materials faster during high-demand periods.
• Negotiation Leverage: A reputation for paying as promised gives your business stronger footing when requesting discounts or extended credit lines.
• Crisis Resilience: In times of market volatility or supply chain disruption, suppliers are more likely to reserve limited stock for clients they trust.

A Dependable Payment Reputation Comes with Long-Term Benefits

A dependable payment reputation compounds in value. Over time, it creates a self-reinforcing network of partnerships where everyone benefits from mutual reliability. You attract higher-quality subcontractors, secure better supplier relationships, and spend less time managing disputes. This means you’ll also likely benefit from:

• Lower Administrative Overhead: Fewer payment disputes mean reduced legal and accounting costs.
• Faster Project Turnaround: With steady material flow and loyal crews, projects finish faster and with fewer costly interruptions.
• Stronger Market Perception: Developers and project owners take notice of contractors who maintain positive supplier and subcontractor relationships, which can translate into more bids won.

Cultivate a Culture of Transparency and Accountability

Transparency and accountability are the quiet forces behind every well-run construction project. When there’s payment transparency in construction and everyone involved understands where payments stand, who is responsible for approvals, and when funds will be released, trust naturally grows. However, creating this kind of culture requires structure, training, and the right systems.

Train Project Managers on Payment Communication

Project managers often serve as the bridge between the field and the back office. When they are trained to communicate payment details clearly, they can prevent small misunderstandings from escalating into disputes. As part of your planning, ensure you have:

• Payment Awareness Training: Teach project managers how payment cycles work, from invoicing and retainage to approval chains. When they understand the process, they can set realistic expectations with subcontractors and suppliers.
• Consistent Messaging: Provide standardized templates or scripts for payment updates to ensure communication remains professional, accurate, and aligned with company policies.
• Early Issue Escalation: Empower project managers to flag payment concerns early. Catching potential bottlenecks before they delay payouts shows accountability and care for trade partners.

Provide Subcontractors with Regular Reports and Status Updates

Transparency thrives on predictability. When subcontractors know when and how they will receive updates, anxiety decreases, and cooperation increases. Regular reporting also minimizes time wasted on payment inquiries and back-and-forth emails. To strengthen communication, build processes that include:

• Scheduled Updates: Share weekly or bi-weekly payment status summaries that include invoice receipt dates, expected approval timelines, and projected payment releases.
• Documentation Access: Allow subcontractors to view payment progress through a shared platform or project portal. This small gesture can prevent major frustration.
• Feedback Loops: Encourage subcontractors to provide input on the clarity and usefulness of your reporting. Their feedback can help refine your systems and strengthen collaboration.

Use Third-Party Tools to Increase Visibility Across Payment Workflows

Modern technology makes it easier than ever to maintain visibility and accountability. Digital tools simplify how invoices are tracked, approved, and paid, which reduces the risk of human error and improves confidence among all stakeholders. Consider integrating helpful tools such as:

• Integrated Construction Management Platforms: Centralize invoices, contracts, and change orders, so project managers and accounting teams can work from the same data.
• Payment Tracking Software: Automate approval chains and give subcontractors real-time visibility into payment progress to reduce manual follow-up.
• Audit Trails: Utilize audit logs to track approvals and create a transparent record that protects both general contractors and subcontractors in case of disputes.

While specialized construction payment software can be used for this, much of it can be managed through your Viva Construction Quick Pay portal as well.

Improve Your Construction Payment Practices with Viva

If you’d like to build stronger trust and relationships with your subcontractors but don’t have the reserves on hand to accelerate their payments, or leveraging your reserves isn’t the best use of available capital, Viva can help. We’ve been providing tailored funding solutions since 1999 and have a Quick Pay Program that’s designed to keep control in your hands, while providing flexibility and maximum working capital for subcontractors. To learn how we can help you boost profitability and improve subcontractor relationships and loyalty, talk with a funding specialist.