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General Contractor Payment Terms

General Contractor Payment Terms: What You Need to Know

As a general contractor, setting payment terms is an important part of managing your business. Payment terms determine when you get paid for your services and how much you get paid. These terms are typically outlined in your contract with the client or property owner.

In this article, we will discuss general contractor payment terms, including what they are, why they are important, and what to consider when setting them.

What Are General Contractor Payment Terms?

General contractor payment terms are the payment schedules and methods agreed upon by the contractor and client. These terms typically include the following:

– Payment schedule: When payments are due and how often they are made

– Payment method: The payment methods accepted by the contractor (e.g., check, credit card, wire transfer)

– Late payment fees: The fees charged for payments made after the due date

– Retainage: The percentage of the contract price held back by the client until the project is complete

– Change orders: How changes to the project scope, timeline, or budget will be handled

Why Are General Contractor Payment Terms Important?

General contractor payment terms are important for several reasons:

– Cash flow management: Payment terms help contractors manage their cash flow by specifying when and how much they will be paid.

– Risk management: Payment terms help reduce the risk of non-payment or late payment, which can cause financial hardship for contractors.

– Client relationships: Clear payment terms help build trust with clients and promote positive relationships.

What to Consider When Setting General Contractor Payment Terms

When setting payment terms, general contractors should consider a few key factors:

– Project scope: The scope of the project will affect the payment schedule and retainage percentage. Larger and more complex projects may require more frequent payments and higher retainage percentages.

– Client creditworthiness: Contractors should assess the client’s creditworthiness before agreeing to payment terms. A credit check can provide helpful information about the client’s financial stability.

– Payment methods: Contractors should consider which payment methods they will accept and whether there are any associated fees. For example, credit card payments may come with processing fees.

– Late payment fees: Contractors should set clear late payment fees to incentivize clients to pay on time. Late payment fees should be in line with industry standards.

– Change orders: Contractors should specify how change orders will be handled, including how they will be billed and when payment is due.


General contractor payment terms are an important part of managing your business. As a contractor, you should set clear payment terms that are fair to both you and your clients. By taking the time to consider the factors we’ve outlined in this article, you can set payment terms that help you manage cash flow, reduce risk, and build positive client relationships.