Most of the payment in the construction industry is “physical payment,” and the current pandemic has proved that it is time to go for alternate options that may be more efficient. Payments in the construction industry are inheritably slow, as it takes almost 90 days after invoicing to get paid for the job.

There are multiple reasons why a payment settlement takes too long in the construction sector. Chances are your business cannot afford to wait this long. If you are waiting for GC or project owner to issue a check, then ask them to make payment through various other methods, as discussed in this article.

Alternatives to Paper Checks for Faster Payment

Here are some of the most efficient alternatives to paper checks that can help you get paid faster on the construction job. These alternatives are not only easier on the part of the payment collector, but also the customer as it is hassle-free.

If you want your money in days instead of months, the following are some of the payment options you should offer your clients for a smooth payment process.

Wire Transfers

Wire Transfers are direct bank fund transfer from one party (GC) to another party (contractor, subcontractors, suppliers). This fund transfer takes place directly between banks, so there is no involvement of a third-party service. The client simply tells the bank they would like to transfer funds to your bank account.

Wire transfers are the quickest way to get paid as these are processed immediately, so funds are available within a day, depending on the bank. The good thing about wire transfers is that there is no limit on the number of funds/money that can be transferred. You can transfer as many funds as you want within a single payment as long as you have money available in your account.

However, wire transfers are a bit expensive than other payment alternatives.

Cost: The transfer fee can reach up to $60 or more depending upon each bank. The receiver of the fund transfer is also charged a fee (less than sending fee).

Credit Cards

Payment through Credit Cards is the easiest way for clients (GC, owner) because it is quick and less time-consuming. Many banks offer credit card processing services through which funds can be transferred within 3-5 business days.

You can also get in touch with a construction management company or a credit card processor company. These service providers not only process your credit card payments but also take full responsibility for transferring funds to other accounts.

There are transfer fees related to credit card payments, and most of the time, you can pass these transfer fees to customers (GC, owner). But most state laws prohibit passing on this fee, so make sure to check local law before passing on the fee. We recommend consulting a construction professional to avoid penalties.

Cost: Transfer fee of credit card payment if around 1.5% – 3.5% per transfer. The rate is different for a different processor, so make sure to compare these rates before choosing one.

Direct Deposits

Direct Deposits transfer funds directly from one bank account to another electronically. Through this, GC or the owner can directly transfer funds from their bank accounts to yours electronically, with ease. There is no need to stand in line at the bank with a paper check and wait for weeks till the payment is released. With direct deposits, there is no need to worry about expiry dates on the checks, card numbers.

Fund Transfer through Direct Deposits takes only 3-5 business days and have less processing fees as compared to payment through wire transfers or credit cards. You can also consult a construction management expert regarding this payment process if you are planning to transfer or receive large sums of money. Keep in mind that there is a daily limit to transfer funds through this channel, so schedule your payments ahead of time.

Cost: 0.5 – 1% of the transaction or 0.25$ – $0.75 per transaction.

*Transfer fee is different for different banks.

Peer to Peer Payment

Peer to Peer payments is becoming popular with apps like PayPal, Square Cash, etc., as these apps transfer funds with little to zero fees. These apps allow parties to transfer funds with only an email address or a phone number, thus protecting your confidential information.

These P2P apps are designed for the transfer of smaller amounts, but there is a limit on daily transfer, e.g., $60,000 per day on PayPal. The low transfer costs associated with payment makes it the best option for businesses that need to transfer small amounts of money with no hassle. The transfer takes within 1-3 business days, depending upon the amount.

Cost: Most of the apps have zero transfer fees, except when the user is using a credit card. If a credit card is being used for funds transfer, then the standard credit card processing fee is charged.

Ways to Ensure Timely Payment in Construction 

There are some other ways to ensure quick payment and reduce the risks of non-payment, as discussed below.

1. Use Late Payment Penalties

Slow payments can have severe effects on a construction business, therefore let your customers know that there are penalties on late payment. Include a late payment penalty in your construction invoice, and keep it as a percentage of the total amount.

Most local authorities already have state laws that require GC and owners to make payment within a time frame or pay penalties or interest fees. We recommend consulting with a Quantum expert before approaching your customers with payment penalties.

2. Protect your Mechanics Lien Rights

In construction, a mechanics lien is the most powerful tool to protect your payment. Every step of the lien, including the preliminary notice and a notice of intent of lien, makes sure you are paid in time without any delays.

Filing a lien is not always necessary, but protecting your lien rights is. So, consult with construction claims consultants Dubai and protect your rights to a lien in case of non-payment in the future.

You have the Power to Get Paid Faster!

Collecting payment in the construction industry can be a headache. It is a long process of running back and forth between offices and banks. However, in this digital age, there is no reason why you should have to wait months for payment when there are many efficient alternatives available, as discussed above.

You have the right to receive payment for the work you do. Don’t make things harder for yourself and ensure that you are paid on time.