Why These Payment Terms Exist
Payment terms like Net 60 and Net 90 are standard practice in construction and contracting, but they create a real financial strain that doesn't always get discussed openly. These terms mean a contractor completes the work, submits an invoice, and then waits 60 or 90 days for payment — all while payroll, materials, and equipment costs continue on a much shorter timeline, usually weekly or biweekly.
These terms exist for reasons rooted in how larger construction projects are financed and administered. General contractors, developers, and municipalities often have their own internal approval chains, budget cycles, and audit requirements before a payment goes out. A subcontractor's invoice might sit in a queue behind dozens of others, waiting on a project manager's sign-off, a budget reconciliation, or a scheduled payment run that only happens once a month.
The Real Cost of Waiting on Payment
The math behind this gap is worth spelling out with a concrete example. If a contractor completes a project in month one, invoices immediately, and the client operates on Net 90 terms, payment might not arrive until month four. In the meantime, the contractor has already paid subcontractors, covered material costs, and met payroll obligations for that project and likely several others running concurrently.
General contractors working with larger commercial clients, municipalities, or developers often have the least room to negotiate these terms, since the payment schedule is usually set by the client, not the contractor. Smaller subcontractors further down the chain can be squeezed even harder, sometimes waiting on payment from a general contractor who is themselves waiting on the client.
How Contractors Can Manage the Gap
There are a few practical ways contractors manage this gap. Some negotiate partial upfront deposits or milestone-based billing where possible, which helps but doesn't eliminate the lag entirely on larger projects. Others build a larger cash reserve specifically to cover payroll during these waiting periods, though that ties up capital that could otherwise go toward growth, new equipment, or bidding on additional work.
A third option is short-term funding designed specifically to bridge this kind of gap — capital advanced against the value of outstanding, verified invoices so payroll and materials can be covered without waiting on the client's payment cycle. This approach, sometimes called receivables or invoice-based funding, is sized to work already completed and billed, rather than projected future revenue.
On the invoicing side specifically, a few habits tend to reduce delays even within a fixed Net 60 or Net 90 structure. Submitting invoices immediately upon completing a milestone, including complete, correctly formatted documentation the first time, and following up proactively at the 30-day and 45-day marks all tend to keep an invoice from quietly slipping to the bottom of a processing queue. It's also worth factoring payment terms into project bidding itself — a project with Net 90 terms effectively costs more to deliver than one with Net 30 terms, once the financing cost of carrying that receivable is accounted for
Contractors who find Net 60 and Net 90 terms consistently straining their operations can talk to a funding broker about receivables-based options to see what's available for their specific project pipeline and payment history.
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