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What to Do When You Aren’t Getting Paid

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Every contractor relies on prompt payment to keep the cash flowing. One late payment can affect material deliveries and create havoc on the job site. Making sure all your customers are paying on time is key to keeping your business afloat.
Unfortunately, late payments seem to happen all too often in construction. Contractors and suppliers often wait more than 80 days for payment! Here are things you can do to speed up the process when you aren’t getting paid in a timely fashion.

Review your credit policy

A credit policy sets clear guidelines as to who you’ll extend credit to and what your payment terms are. The policy includes criteria to receive credit, like years in business, credit rating, BBB rating, or other criteria. A good written policy helps your credit department grant credit only to those who are a good credit risk.
If you don’t have a credit policy to determine when to grant credit to your customers, it’s a good time to create one. Credit services can help you check the credit rating of potential customers and give you guidance on what criteria to check.

Review your collection policy

A collection policy allows your customers to know what steps you’ll take when you aren’t getting paid according to the terms of your credit policy. Steps may include sending statements, follow-up calls, sending debts to collection, or filing a mechanics lien or lawsuit. Ultimately, an effective collection policy will collect as much money as possible with as little action as possible.
Your team must get used to implementing the plan for all customers until it becomes part of your normal processes. If certain clients are given special treatment, things can get complicated and problematic. The key to a successful policy is applying it consistently across all your customers.

Review contract terms

Most contracts will include payment terms, including what the process is, what documents are required, and the timeline. Make sure you review your contracts carefully so you know what documents you need to turn in and how long payment may take. Payments are often held up due to a lack of paperwork.
Be sure to not only note the terms of the contracts you send out, but also contracts sent to you. Review both contracts carefully so you know your rights and responsibilities for each project.

Make a bond claim

If you’re working on a state or federally funded public project, the general contractor likely had to purchase a payment bond. A payment bond is like an insurance policy that guarantees that the lower-level subcontractors and suppliers will be paid. If payment is not made according to the terms of the contract, subcontractors and suppliers can file a claim against the bond and get paid by the surety (or insurance) company.
Start a bond claim by sending a notice of intent to file a bond claim. It’s a letter that acts as a final warning that if you aren’t paid soon, you will be filing a claim. The letter should state that you haven’t been paid, summarize the amounts owed, and request immediate payment.
If you do not receive payment after submitting a notice of intent, then it may be time to file a bond claim. Deadlines vary as to how long you have to file a claim, so check your local statutes. For example, in Oregon you have until 180 days after the date of last furnishing labor and/or materials to the project to file a bond claim.
A copy of the claim is sent to the GC, the hiring subcontractor (if applicable), the surety, and the contracting public entity or owner. It must be sent by certified mail, return receipt requested, or by hand delivery. The claim must include the following information:

  • Name of your company
  • Description of the labor and/or materials furnished
  • Amount of the claim (unpaid balance)
  • Name of the general contractor who supplied the bond
  • Who hired you, if different than the general contractor
  • Name of the surety company, if known
  • Description of the project

Once you have submitted a bond claim, you have up to two years from the last date of work to file a lawsuit to collect on it.

File a mechanics lien

If you are working on a private project (owned by a private citizen or company), by statute, you have the right to file a mechanics lien against the property you’re working or providing materials for. A mechanics lien is a document that’s filed at the county clerk and is attached to the deed for the property. If the property is ever sold or transferred to another party, the lien must be paid first. In this way, it helps ensure that contractors and material suppliers will be paid for the work they’ve done.
State laws vary on the process for filing a mechanics lien and deadlines for filing. Check with the state the project is located in for rules and regulations.
When a payment issue arises, you can file a mechanics lien. In Oregon, for example, the lien must include the following information:

  • A true statement of the amount owed, less any credits and offsets
  • Name of the owner or reputed owner of the property
  • Who hired you
  • Description of the property
  • Signature and notarization

Once you’ve drawn up the lien document, it is delivered to the clerk’s office in the county the property is located in for recording. Once it is recorded with the clerk, you must send a copy of the recorded lien to your client within 20 days.
If you do not receive payment by the time the lien is set to expire, you can extend the lien, but only with agreement from the owner, or foreclose on it by filing a lawsuit. If you win the lawsuit, the owner will be forced to sell the property in order to pay the debt. If you do nothing, the lien will be canceled, and you will have no right to payment.


Not getting paid can disrupt everything. Your business depends on the flow of cash, and when it’s not coming in it can be devastating. You can be proactive in your efforts by developing strong credit and collection policies, knowing your contracts, and using bond claims and mechanics liens to enforce your right to payment.

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