Debt Collection for Construction Companies: Getting Paid on Completed Work

Construction companies lose $280 billion annually to slow and non-payment. 82% of contractors routinely wait more than 30 days past terms for payment. If you've completed the work and the client won't pay, your three strongest tools are: the mechanics lien (or equivalent in your jurisdiction), the formal payment demand referencing retention and milestone obligations, and professional collection before the payment chain breaks further.

You poured the concrete. You installed the steel. You signed off on the punch list. And now the general contractor — or the developer, or the project owner — has decided your invoice is a suggestion rather than an obligation. Construction payment disputes are a special kind of frustrating because the evidence of your work is literally standing there, visible from the road. Here's how to convert that completed work into completed payment.

1. Verify the payment chain. Construction payment flows downhill: owner pays general contractor, GC pays subcontractors, subs pay suppliers. Your non-payment may originate two levels up. Before chasing the company that owes you, find out whether they've been paid by the party above them. If the GC hasn't been paid by the owner, your collection strategy changes.

1. File your mechanics lien within the deadline. This is the most powerful tool in construction collection and the one with the tightest window. A mechanics lien attaches to the property itself — meaning the property can't be sold or refinanced until your lien is resolved. But filing deadlines vary dramatically by jurisdiction: 60 days in some US states, 90 in others, and the clock starts at different trigger points. Miss the window and you lose the right entirely.

1. Send a formal payment demand. Reference the contract, the completed milestones, the approval or sign-off documentation, and the specific amount due. Include any retention amounts that are now due for release. Reference your lien rights if applicable.

1. Escalate to professional collection. Construction collection requires industry-specific knowledge — retainage disputes, change order disagreements, substantial completion arguments. A generalist collection approach misses these levers.

Retainage (or retention) is the percentage of each progress payment withheld by the project owner or GC — typically 5-10% — as a guarantee against defects or incomplete work. It's supposed to be released after substantial completion or final acceptance.

In practice, retainage is where construction payments go to die. GCs hold retainage long after the project is complete, using it as free cash flow. Owners withhold retainage citing deficiencies that are either minor or fabricated. And subcontractors — who've already financed the project through their own labour and materials — are left waiting.

Your contract should specify when retainage is due for release. If the conditions have been met (substantial completion, punch list clearance, final inspection) and the retainage is still being held, that's not a retention — it's a debt. Treat it accordingly.

In most jurisdictions, yes — if you've done work or supplied materials that improved the property. The mechanics lien is a statutory right that exists in most US states, many Canadian provinces, and equivalent mechanisms exist in the UK (charging orders), Australia (security of payment legislation), and parts of the EU.

The critical constraints are time and notice. In many US states, you must send a preliminary notice within 20-30 days of starting work, and file the lien within 60-90 days of last furnishing labour or materials. In the UK, the Construction Act provides adjudication rights with specific notice requirements. Miss these deadlines and the right evaporates regardless of how much you're owed.

The payment chain is the fundamental problem. In no other industry does a supplier wait to be paid until their client's client pays their client. A software company doesn't accept "our customer hasn't paid us yet" as a reason for non-payment. But in construction, "pay-when-paid" clauses are standard — and they create a cascading default risk that starts at the top and crushes whoever is at the bottom.

Industry data tells the story: average DSO in construction is 83 days — the highest of any major industry. 82% of contractors experience payment delays of 30+ days. And the companies most affected are subcontractors and suppliers with the least bargaining power and the thinnest margins.

The work is done. The building is standing. Your invoice is the only part of the project that's incomplete.

Contact us for a free review. We specialise in construction receivables and understand retention, lien rights, and payment chain disputes.