search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!
Columns

S l o w P a y
Jim Olsztynski

By Jim Olsztynski
June 11, 2007
The construction industry is in need of a cultural revolution to get with the times.

No doubt many of you reading this are “Type A” personalities like me. Type A behavior patterns are characterized by impatience and aggressiveness. We hate to wait, love to take charge, and are prone to multi-tasking and workaholism. Delays in anything drive us batty - although that’s redundant, since Type A’s are considered to be batty by definition.

Most contractors are Type A. Must be, otherwise nothing would ever get built. Somebody has to cut through construction’s legal and bureaucratic rigmarole that prevents anyone from actually doing anything productive. Type A’s are the ones who finally take charge and see to it that a usable structure takes shape.

Nonetheless, even our industry’s most energetic Type A’s cannot escape the black hole of inertia at the center of construction’s financial universe. No other industry that I’m aware of has such an ingrained culture of slow pay throughout.

We live in a world of electronic payment transfers at close to the speed of light. Millions of people pay their household bills online. Credit cards allow businesses almost instant access to cash from transactions, and almost every business accepts credit cards nowadays. Many utilities and credit card companies are going away from 30-day grace periods and insisting on due dates within a couple of weeks or “upon receipt.” In many cases they sting late payers with finance charges. In virtually every part of the business world except construction, payment cycles are speeding up, because most businesses actually take cash flow seriously.

Then why, oh why, does it typically take construction contractors months to receive their money for services rendered on time? OK, so there’s a 10 percent retainage tradition to make sure everything gets done in a workmanlike manner. So be it. How about the other 90 percent of billings? Why can’t progress payments get collected within days rather than months after the work gets completed?

Data from the American Supply Association shows collections for plumbing wholesalers average 48 days. That number has been creeping up rather than going down over the years. Wholesalers specializing in commercial accounts would feel like they’ve gone to heaven if they could get paid within 60 days. Most wholesalers tell me fewer than 10 percent of contractors pay within 10 days, meaning 90-plus percent forego free money stemming from the traditional 2 percent supply house discount. Some distributors have trimmed it to 1 percent or done away with the discount altogether because so few customers take advantage of it.

I realize that subcontractors have little control over this situation. You rely on the builder or GC to pay you, and they withhold payment until they get paid by the owners. It would be in the interest of all construction players to speed things up.

Subs aren’t entirely blameless, though. Many take weeks or even longer to submit their invoices for completed work. They have succumbed to the culture of slow pay, like lifelong welfare recipients who know no other lifestyle and fail to comprehend ways to pull themselves up by the bootstraps.

A bigger problem is that too many contractors fail to provide enough capitalization for their business. They depend on draws to meet payroll and pay suppliers. When payments are slow, supply houses get stretched, paychecks delayed and withholding taxes shortchanged. The contractor may make good on everything when a progress payment finally comes through, but then begins another slowdown until the next one. The situation grows worse when the contractor cuts margins just to keep booking jobs. Then there’s never any cash left to cover expenses over the horizon.

Profitable contractors can tap into short-term bank loans to cover cash flow gaps, but lenders shy away from people whose finances are stretched to the limit. So some contractors end up tapping personal credit cards, whose interest gouge just makes matters worse. Many contractors end up sacrificing their own paychecks for long periods - a noble practice but a hard road to business success. Less noble contractors will shortchange employees, materials and workmanship.

Progressive residential service contractors have broken with the industry’s slow pay tradition by making all jobs C.O.D. via check or credit card. Maybe that’s not practical in the construction world, but it’s time for some sort of cultural revolution to speed things up.

Time is money, or lack thereof.



Links

  • Contact Plumbing & Mechanical

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Jim Olsztynski is the former editorial director of Plumbing & Mechanical.

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

    Pipeline profits: Drain cleaning, pipe inspection create opportunities

    Drain cleaning and inspection services offer lucrative...
    Plumbing News
    By: Nicole Krawcke
  • Uponor employee, Arturo Moreno

    The reinvestment in American manufacturing and training

    Plumbing & Mechanical Chief Editor Nicole Krawcke and...
    Plumbing News
    By: Nicole Krawcke and Natalie Forster
  • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

    Celebrating 10 Influential Women in the Plumbing Industry

    Celebrating Women's History Month and Women in...
    Plumbing News
    By: Nicole Krawcke
Subscribe For Free!
  • eNewsletters
  • Online Registration
  • Subscription Customer Service
  • eMagazine
  • Manage My Preferences

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • J.J. Keller CMV vehicles on road
    Sponsored byJ. J. Keller & Associates, Inc.

    The dash cam game-changer for small business safety

Popular Stories

The interior of a government building.

President Trump signs executive order promoting skilled trades and apprenticeships

Figure 1 is a sketch of the flow problems of the current plumbing system.

Hydronic heating glitch solved: Why adding a circulator won't fix primary loop flow issue

Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

Using hydronics to leverage time-of-use electrical rates

PM BEMIS June 25 Free Webinar: Optimizing Plumbing Solutions for Single-Family, Multi-Family & Public Spaces

Events

November 13, 2024

Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

View All Submit An Event

Poll

Will business be up or down in 2025?

Do you anticipate business in 2025 to be up or down in comparison to 2024?
View Results Poll Archive

Products

The Water Came To A Stop

The Water Came To A Stop

See More Products

Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

Related Articles

  • 5 Keys To Success In The Plumbing Business

    See More
×

Keep your content unclogged with our newsletters!

Stay in the know on the latest plumbing & piping industry trends.

JOIN TODAY!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
    • Supply House Times
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X (Twitter)
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing