Pay-when-paid, and how to size what it costs you
You get paid when the GC gets paid, which means the GC's problems are now your problems.
Pay-when-paid pushes the whole float onto you. Payroll runs weekly and suppliers want their 30 days, but the money doesn't move until the owner funds the draw. That delay is measurable, and most subs have never written the number down. Once you know how many days you're funding, you can price it and finance it.
Three moves, in order
Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Other problems step 07 solves
Other things that go wrong
Contractors who had this
What owners ask
Pay when paid cash flow subcontractor?
You get paid when the GC gets paid, which means the GC's problems are now your problems. Pay-when-paid pushes the whole float onto you. Payroll runs weekly and suppliers want their 30 days, but the money doesn't move until the owner funds the draw. That delay is measurable, and most subs have never written the number down. Once you know how many days you're funding, you can price it and finance it.
Which part of the system fixes this?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: The Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M–$5M averages 7% before taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Measure the days from work performed to cash received on your last ten jobs.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.