The Complete Guide to Getting Paid in Construction

In construction, doing great work is not enough to guarantee you get paid. Slow payment is routine, subcontractors and suppliers are usually the last to get paid, and many absorb real losses every year from unpaid invoices.

But it does not have to be this way. Contractors who understand the payment chain, protect their rights proactively, and follow a disciplined process get paid more often and faster. Here is the complete playbook.

Step 1: Set Up Payment Protection Before Work Begins

The biggest mistake contractors make is waiting until they are not paid to think about payment protection. By then, critical deadlines may have already passed.

Send Preliminary Notices on Day One

In many states, your right to file a mechanics lien depends on sending a preliminary notice on time. In California, for example, you have 20 days after you first furnish labor or materials. In Texas, subcontractors and suppliers send a notice for each month of unpaid work.

A preliminary notice does not mean anything adversarial. It simply notifies the property owner and other stakeholders that you are working on the project and have certain payment rights. Many general contractors and property owners actually appreciate receiving them because it helps them track who is working on their project.

Rule of thumb: Send a preliminary notice on every project, even if you think you will not need it. The cost is trivial compared to losing your lien rights.

Verify Bond Information

On public projects, ask for the payment bond information before you start work. Get the surety company name, bond number, and principal contractor name. You will need this information if you need to file a bond claim later, and it is much easier to obtain at the start of the project than after a payment dispute begins.

Get It in Writing

Every project should have a written contract or purchase order that specifies the scope of work, total price, payment schedule, and payment terms. Handshake deals make it nearly impossible to prove what was agreed upon if a dispute arises.

Step 2: Invoice Properly and Promptly

Poor invoicing is a surprisingly common cause of payment delays. General contractors and property owners manage dozens of subcontractors. If your invoice is late, incomplete, or formatted incorrectly, it goes to the bottom of the pile.

Invoice Immediately After Each Milestone

Do not wait until the end of the project to invoice. Submit invoices as soon as each milestone is complete or according to the schedule in your contract. The faster you invoice, the faster the payment clock starts.

Include All Required Information

Every construction invoice should include:

• Your company name, address, and contact information
• The project name and address
• Invoice number and date
• Detailed description of work completed
• Contract amount, previous payments, current billing, and balance remaining
• Retention amount (if applicable)
• Supporting documentation (daily reports, material receipts, inspection sign-offs)

Follow Up on Every Invoice

If payment is not received by the due date, follow up immediately. Do not wait weeks hoping the check is "in the mail." A polite but firm reminder on day one of lateness sets the tone that you expect timely payment.

Step 3: Escalate Strategically When Payment Is Late

When invoices go unpaid, escalate in a deliberate, documented order.

Level 1: Phone Call and Email (Day 1-7)

Call the person responsible for payment. Ask when to expect the check. Follow up with an email summarizing the conversation. This creates a written record.

Level 2: Formal Demand Letter (Day 8-30)

If the phone call does not produce results, send a formal demand letter. This letter should state the amount owed, reference the contract, set a payment deadline (usually 10 days), and mention your intent to exercise lien rights if payment is not received.

A demand letter signals that you are serious. Many payment disputes resolve at this stage because the other party realizes you are willing to escalate further.

Level 3: Notice of Intent to Lien (Day 15-45)

In some states, including Pennsylvania, Wisconsin and Colorado, you must send a notice of intent a set number of days before actually filing. Even in states where it is not required, sending one is a powerful motivator. Property owners take lien threats seriously because a lien encumbers their property.

Level 4: File the Mechanics Lien (Before Your Deadline)

If demand letters and notices have not produced payment, file the mechanics lien. This is a formal legal document recorded with the county recorder's office. It attaches to the property and remains until resolved.

Do not wait until the last day of your filing window. Deadlines vary by state and can be as short as 30 days. Missing the deadline by even one day usually ends your lien rights.

Level 5: Enforce the Lien (Lawsuit)

A mechanics lien is only as powerful as your willingness to enforce it. After filing, you have a set time to file a foreclosure lawsuit: 90 days in California, a year in many states, and in Tennessee a subcontractor has only 90 days after serving its notice of lien. If you do not enforce within this window, the lien expires.

Consult an attorney before reaching this stage. The cost of litigation needs to be weighed against the amount owed.

Step 4: Protect Your Cash Flow

While pursuing payment on overdue invoices, protect your business from the financial impact:

• Maintain cash reserves of at least 2-3 months of operating expenses
• Diversify your client base so one slow-paying client does not sink you
• Consider invoice factoring as a short-term bridge if cash flow is critical
• Do not take on new work for non-paying clients until previous invoices are resolved

The Technology Edge

Manually tracking preliminary notice deadlines, lien filing windows, and bond claim requirements across multiple projects in different states is a recipe for missed deadlines. One missed deadline can cost you tens of thousands of dollars in lost payment rights.

LienShield tracks deadlines for the 49 US jurisdictions it supports. Enter your project details and it calculates the notice, lien and lawsuit deadlines it can, reminds your team before each one, and helps you generate the documents you need to protect your payment rights.

Getting paid in construction is not just about doing good work. It is about protecting your right to be paid for that work.

Start protecting your payments free with LienShield →