Construction payment infrastructure is hopelessly outdated – but the momentum is shifting, writes Mateo Zimmerman of Cemex Ventures
While payment technology has rapidly modernised industries like retail and healthcare, construction remains a holdout. Despite the size and complexity of modern projects, most contractors still rely on manual, paper-based payment processes. The result is a system riddled with delays, inefficiencies and financial strain across the value chain.
That’s starting to change. A new wave of financial technologies tailored to construction is gaining traction, offering better ways to manage payments, increase transparency and speed up cash flow. But adoption won’t be easy.
Longstanding habits and fragmented workflows still stand in the way. However, companies that begin making the shift now are more likely to see long-term benefits – from improved cash flow to stronger project partnerships.
How payment works today – and where it fails
Many construction payment delays stem from outdated processes that rely heavily on manual coordination. It often begins with subcontractors submitting monthly invoices and supporting documents by email or regular mail.
The general contractor (GC) then reviews the paperwork, compares it to project progress and manually compiles a larger invoice to send to the project owner or lender. This sets off a “pay-when-paid” chain – a common practice in which subcontractors don’t receive payment until the general contractor has been paid by the owner or lender.
Along the way, additional certifications or inspections are often required before funds are released. The result is a slow, opaque system in which subcontractors routinely wait 60 to 90 days for payment. In the US, recent surveys put the average wait at 74 days.
For contractors, this outdated process has real consequences. Slow payments tighten cash flow, force contractors to rely on personal credit and increase the risk of disputes and work stoppages.
Rising interest rates have made this even more painful. A 2024 report found slow payments added 14% to total US construction project costs last year – roughly $280bn in extra expenses.
Emerging technologies reshaping construction payments
Momentum is building to modernise these systems. In recent years, a wave of construction technology startups has introduced financial tools designed for construction’s complex, fragmented payment workflows. And while adoption has been slower than in other industries, meaningful progress is underway.
For example, startups like Constrafor are digitising procure-to-pay workflows, streamlining everything from subcontractor invoicing to supplier payments. Others, including Ontik and NetNow, are accelerating payment cycles and improving financial transparency.
While no single platform will resolve every challenge overnight, early innovators are steadily chipping away at the barriers that have long held the industry back.
Still, adoption isn’t without challenges. Construction’s fragmented ecosystem – involving owners, GCs, subcontractors, suppliers and lenders – makes it difficult to capture the full benefits of new systems unless the entire value chain participates.
Integrating modern tools into existing accounting systems and ERP platforms can be technically complex and disruptive. On top of that, there’s a deep cultural resistance to change in financial workflows, with many companies preferring the manual methods they’ve trusted for decades.
Despite these hurdles, the momentum is clear: owners and GCs are recognising that the cost of inefficiency is fast outweighing the cost of change.
The case for incentivising contractors
Incentivising GCs to adopt modern payment systems is critical to breaking the cycle of late payments. As the central node in most project payment chains, GCs are well-positioned to drive change. When they modernise, the benefits cascade throughout the value chain – improving cash flow for subcontractors, enhancing transparency for owners and reducing administrative overheads.
The business case is clear. Subcontractors often raise prices by 6% to 10% to compensate for delayed payments, and 88% say they avoid bidding with GCs that have poor payment reputations. By paying faster, GCs can lower project costs, attract better bids, and save significantly on administrative tasks.
Regulatory and owner-driven pressure is increasing as well. Some owners now require real-time visibility into subcontractor payments, while the UK market enforces strict payment timelines for public projects. Operationally, prompt payments keep projects on schedule,
reduce disruptions and strengthen a GC’s reputation. Even modest early-payment incentives can improve outcomes across the board.
Final thoughts
Ultimately, modernising construction payments will require education, strong financial incentives and industry-wide collaboration. This won’t happen overnight but the financial, operational and reputational risks of clinging to outdated processes are too great to ignore.
By embracing modern payment technologies and aligning incentives across the value chain, construction companies can improve cash flow, reduce project risk and build stronger, more resilient partnerships for the future.
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