The Silent Squeeze
Margins don’t just shrink on site – they vanish in the payment cycle. When payment terms are stretched, cash is locked up, subcontractors get restless, and projects stumble before they ever reach completion.
Where does it go wrong?
- Contracts agreed with 60–90 day terms that strain working capital.
- Pay-when-paid clauses that push risk down the chain.
- Applications for payment submitted late or rejected on technicalities.
- Retention held beyond contractually agreed periods.
The Root Cause
Payment terms are often signed off without enough scrutiny during contract negotiations. Commercial teams focus on headline numbers, not the hidden cost of cash flow drag. By the time projects are running, businesses are already playing catch-up.
One real-world example:
A subcontractor on a £12m project waited 92 days for payment on approved works. In that time, they borrowed heavily to cover payroll – wiping out almost all of their project margin.
Cash is Confidence
The best commercial teams:
- Negotiate payment terms with the same energy as price.
- Submit applications early, with robust supporting evidence.
- Track certification timelines to avoid delays.
- Actively chase and enforce release of retention.
Final Thought
Profitability isn’t just about what you earn – it’s about when you get paid. Strong payment term management protects both cash flow and confidence.
