Construction professionals are all too familiar with the payment issues that plague the construction industry. Contractors, subcontractors and material suppliers often have to deal with payment delays and even nonpayment—affecting cash flow and their ability to meet expenses.

According to an Atradius study, a quarter of all B2B invoices issued in North America are overdue. The construction industry accounted for one-third of those past-due invoices, and many contractors and construction business owners do not have a positive outlook on the industry's payment issues. The same survey found 55% of U.S. firms think there will be no change in the industry’s payment practices over the coming months—one-third even expects an increase in late payments.

These findings show that managing cash flow is a significant challenge in the construction industry. Having a negative cash flow will push the company toward financial trouble, which may ultimately lead to its demise. Understanding the reasons why payment issues persist in construction will help contractors protect their business, prevent these issues from happening or at least minimize their effect on the current operations.

Reprinted courtesy of Patrick Hogan, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.