Net 30, and whether you can afford it

Net 30 means payment is due 30 days after the trigger stated in the agreement, such as invoice receipt. To decide whether you can afford it, forecast cash outlays through the date funds actually clear, including other jobs running at the same time. Negotiate earlier draws or limit the work if the gap exceeds your available cash.

Ask what the GC’s payment cycle allows

A GC’s proposed terms may reflect its own billing and payment cycle.

They bill the owner monthly on a pay application that an architect or construction manager has to approve. Their own contract holds retainage back. Ask whether accounts payable uses a fixed check schedule and who can approve different terms. Many subcontracts also carry a pay-when-paid or pay-if-paid clause tying your money to the owner's payment upstream, and how enforceable that clause is depends on your state.

So the negotiation is rarely "30 or 15." It is about what you can move around the 30: what gets paid up front, how often you bill, and what day the clock starts.

Find the start date and expected clearing date

Confirm the agreed start date and allow for these potential delays in your cash forecast:

• Billing cutoff. Ask when the GC accepts progress invoices. Missing the cutoff can delay inclusion in the next application.
• Approval. The project manager signs off on quantities, and a signed lien waiver usually has to arrive before the invoice reaches AP.
• The clock's start date. "Net 30 from invoice receipt" and "Net 30 from approval" are two different dates. Get the wording in writing.
• The check run. A missed run can delay actual payment. It does not automatically extend the agreed or statutory due date.

Plan for the gap from first outlay to cleared funds, not just the stated due date. On a first job with a new GC, use the cautious case.

One job, in cash-out order

Illustrative $21,000 commercial tenant-improvement job: three weeks of work, one invoice at completion, Net 30 from invoice receipt. The assumed approval and payment dates are not industry averages.

The job is profitable. It is also $14,100 of your own money, gone for nearly two months, on a job you priced at a 33% gross margin.

The table leaves out overhead, which continues through the wait and must be funded too.

Estimate the cash tied up across ongoing work

The mistake is treating this as one invoice. Once the second job starts, the first still has not paid, and the amount stays out for as long as you keep the client.

Cash tied up = weekly cash out on Net 30 work × weeks to funds clearing

Take that same shop at a steady two-crew pace: roughly $7,000 a week going out in fully loaded labor and materials, and about eight weeks from a week's spend to that money landing.

$7,000 × 8 = $56,000 tied up while that pace continues

That $56,000 is the real cost of the terms. Then subtract the float you already have:

Compare that with cash in the bank plus unused credit. If the gap is bigger, cap how much work sits on those terms at once.

Ways to reduce the cash gap

Compare these options against the dates and costs of your job:

• Bill progress instead of waiting for completion. On a longer job, earlier agreed draws can shorten the gap. Monthly billing would not necessarily help the three-week example; compare the actual cutoff dates.
• A mobilization or material payment up front. A deposit and Net 30 are not contradictory, and funding materials at the start removes your largest single outlay.
• Bill for stored materials. Many contracts allow invoicing for material delivered to site and not yet installed. If yours does, use it.
• Get supplier terms that match. Buy on Net 30 and the material float is not yours to carry. Usually easier to arrange than better terms from a client.
• Nail down the cutoff and the start date. Worth two weeks, at no price concession.
• Compare a line of credit before you need it. Get a written offer and compare interest, fees, security and repayment conditions with other funding options.

Price any early-payment discount against the cash it actually releases; it can be expensive working capital.

What factoring actually costs

Invoice factoring sells the receivable. Under an advance arrangement, the factor pays part of the invoice now and may hold a reserve. Ask who collects from the customer and when any reserve is released.

Ask for the advance amount, reserve, fees and how fees increase if payment is delayed. A fee quoted per 30 days is not an annual rate. Check whether the factor accepts retainage, disputed changes and conditional-payment clauses before counting on funding.

Read for the terms that cost more than the headline rate: whether it is recourse (you buy the invoice back if the customer never pays), whether your customer is notified to pay the factor directly, minimum monthly volume commitments, and the termination notice period. Price a bank or SBA-backed line of credit first. Compare the full cost over the period you expect to use it.

Extending terms is extending credit

Agreeing to Net 30 means funding costs until payment. Any lien, bond or other security depends on the project and the steps required to preserve it.

Ask for the AP contact and the billing procedure before the first day of work, not after the first invoice. Ask other subs about payment history as one source of evidence alongside financial and credit checks. Confirm the license status with your state licensing board. Check preliminary-notice requirements before starting; the notice trigger can precede any overdue invoice. California’s CSLB guide explains one state’s process. Verify your role, trigger and deadline for the actual project.

Knowing what is outstanding, without rebuilding it

Keep billed amounts, due dates and receipts in your accounting records, with a dated forecast of remaining costs. DoneQuote provides the supporting priced quote and recorded approval. Write the deposit and payment terms on that quote before sending; an approved quote is not a work-in-progress or unpaid-invoice total.