Instant Payments Could Eliminate Construction’s $280B Late Payments Problem

Download the Money Mobility Tracker® Digital Rebuild: Transforming Payments in the Construction Industry

Delayed and incorrect payments are a perpetual headache for the construction industry. These issues not only burden accounting teams but also have serious downstream ramifications. Project delays and canceled contracts are just some of the consequences of payment problems. In the United States alone, slow payments in the construction sector have caused a staggering financial impact of $280 billion in 2024. This has led to escalating costs and operational challenges throughout the industry. Implementing faster, digital payment systems can significantly reduce late payments and their consequences.

While improved cash flow is the proverbial carrot, there is also a stick. Many government regulators are now requiring contracting firms to get a handle on their late payments under threat of sanctions.

The “Money Mobility Tracker®” examines how faster, digital payment solutions can help the construction industry tackle costly late payment challenges — enhancing cash flow, reducing overhead and enabling firms to stay compliant with tightening regulations.

Late Payments Negatively Impact Cash Flow

Late payments are a persistent challenge for the construction industry, creating severe cash flow problems for firms. Vendors and employees say they are at risk of not getting paid, which can bring construction to a standstill. In fact, slow payments are costing the construction sector $280 billion in 2024. According to a recent study, payment delays constituted 14% of total construction costs, causing significant financial harm to construction companies. Ninety-eight percent of general contractors reported an increased reliance on personal savings, credit cards and even retirement funds to sustain their businesses while awaiting payments. The problem has only worsened in recent years.

To learn more, visit the Tracker’s Legacy Payment Challenges section.

How Faster Digital Payments Improve Cash Flow

Adopting faster payments can help construction firms significantly improve their cash flow and overall financial health by reducing payment errors and delays. A recent study revealed that 14% of total construction costs could be eliminated by implementing faster and more reliable payments to contractors. These savings come from various sources, such as reducing the need to replace contractors who quit due to payment frustrations and taking advantage of discounts offered by contractors for fast payments. In fact, 58% of general contractors said they would reduce prices 11% or more if they were paid promptly.

To learn more, visit the Tracker’s Improving Cash Flow section.

Regulators Crack Down on Late Construction Payments

While construction firms have plenty of reasons to modernize their payment systems, government regulators are adding even more urgency. In both the U.S. and the U.K., lawmakers are cracking down on companies that delay contractor payments. New York’s Prompt Payment Act, set to take effect in November, is a key example. The law limits how much a building owner can withhold from a contractor — whether due to a delay or intentionally — and allows contractors to submit final invoices before project completion to speed up payments. Cash flow is already strained. The average firm’s days sales outstanding (DSO) rose from 90 days to 94 days between 2022 and 2023. The law’s goal is to alleviate these pressures so that contractors get paid faster.

To learn more, visit the New Payment Regulations section.

About the Tracker

The “Money Mobility Tracker®,” a collaboration with Ingo Payments, examines how faster, digital payment solutions can help the construction industry tackle costly late payment challenges — enhancing cash flow, reducing overhead and enabling firms to stay compliant with tightening regulations.