Slow Payments Cost $280 Billion in 2024, Threaten U.S. Construction Industry's Financial Health
AUSTIN, Oct. 01, 2024 (GLOBE NEWSWIRE) -- Rabbet, the leading provider of construction finance software, today released its much-anticipated 2024 Construction Payments Report, highlighting critical insights into the financial and operational challenges facing the U.S. construction industry. This year's report highlights that slow payments have cost the construction sector a staggering $280 billion in 2024, leading to increased costs and strained business operations across the industry.
Drawing from survey responses from general contractors and subcontractors, the report exposes how payment inefficiencies are threatening the financial health of the industry. With 95% of general contractors and 75% of subcontractors now floating payments while awaiting developer disbursements, the consequences can impact future project timelines and budgets.
Key Findings:
- $280 Billion Cost of Slow Payments: Delayed payments have increased costs by 14% of total construction spending in 2024.
- Cash Flow Crisis: 98% of general contractors report greater reliance than in previous years on personal savings, credit cards, and retirement funds to keep their businesses afloat.
- Worsening Payment Delays: 82% of contractors report payment delays of over 30 days?only 49% of contractors faced such delays just two years ago.
- Ripple Effect on Labor Costs: 100% of subcontractors factor in a general contractor's payment reputation when bidding, with over 75% reporting they increase bids to GCs due to delayed payments.
"Slow payments are not just a subcontractor issue?they impact every level of the construction industry, creating a ripple effect that leads to project delays, labor shortages, and higher costs," said Will Mitchell, CEO of Rabbet. "As the real estate sector navigates a swiftly changing economic environment, it's imperative that developers and lenders take action to improve their payment processes. Our report offers valuable insights and recommendations to help mitigate these issues because time matters."
The report further delves into the causes of slow payments, with inefficiencies in payment processing from developers and lenders being cited as the main culprit. General contractors report a 150% increase in using personal retirement savings to float payments, a dangerous trend that threatens the financial stability of many firms in the industry.
Keys to Thrive in 2025
Rabbet's 2024 Construction Payments Report highlights key trends and takeaways for real estate developers and lenders that anticipate growth in the coming 12 months. Firms that invest in technology to streamline their payment processes will be best positioned to secure reliable, skilled labor and reduce the costly impact of slow payments. "An increasingly competitive labor market is ahead of us," Mitchell notes. "With payment efficiency increasingly tied to business reputation and profitability, the report underscores the need for industry stakeholders to prioritize improvements now to Thrive in '25."
To download Rabbet's 2024 Construction Payments Report, visit https://rabbet.com/download-2024-construction-payments-report/ or to learn how Rabbet's solutions can streamline your construction finance processes, visit rabbet.com.
About Rabbet
Rabbet provides transformative solutions that offer a complete picture of real estate development and construction loan portfolios. Designed for real-time workflows and comprehensive insights, Rabbet enables real estate developers, construction lenders, and related service providers to lower operational costs, make more informed decisions, and earn trust with financial stakeholders. Founded in Austin, TX in 2017, Rabbet has improved visibility and efficiency for over $100B in construction and capital expenditure projects. For more information about Rabbet, visit rabbet.com.
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