How Electricians Can Reduce Administrative Overhead with Online Payments
Getting paid promptly and completely impacts your cash flow. While contractors sometimes require deposits, the balance doesn’t become due until the job is completed. When customers are slow to pay, you spend time chasing late payments. One way to reduce this is with digital payment methods.
In this article, you’ll learn about the impact of late payments, the increase in digital payment preference, and how to get started offering this option to customers.
The Impact of Late Payments on Contractors
As a small business owner, you depend on customers fulfilling their contractual duties for payment. You’ve informed your customer of the payment schedule by outlining what’s due and when. However, it’s not uncommon for customers to get behind.
- 72% of subcontractors reported payment delays of over 30 days.
- Contractors spend 56 hours a month managing payments.
If you’re dealing with these challenges, the downstream effect disrupts your operations.
Why are payment delays trending up?
Several factors can cause payment delays. Does your contract clearly define the payment requirements? If not, that’s an easy thing to fix going forward. Another reason may be reliance on legacy payment processes involving paper checks or manual keying of credit cards.
Job changes could disrupt payment, too. If your customers request these, be clear about the increase in cost from the original estimate.
Finally, you’re a small business owner with a lot on your plate. You may not be able to dedicate time to follow-ups on past-due payments.
Any of these can slow down the payment cycle, and you’ll unfortunately feel the effects of this.
Late Payments Impact Cash Flow
When you don’t collect quickly, your cash flow takes a hit. This could affect your ability to pay employees and purchase materials for the next job. If you can’t make payroll, you’re in danger of losing skilled workers.
There are also opportunity cost losses. You lose out on money for each day payments are late due to debt interest and inflation.
In 2023, the cost of slow payments in construction was $273 billion.
Reliable, On-Time Payments Offer Stability
Instead of losses, you achieve gains when payments occur on time. It keeps finances stable so you can grow your business. You also won’t have to spend valuable time collecting.
Steady cash flow helps you obtain small business loans. They demonstrate you’re running a financially secure company.

Strategies for Minimizing Late Payments
How can you prevent late payments before they become a serious issue? There are several ways to avoid aging accounts receivable (AR).
Use an Automated Invoicing System
By adopting a modern invoicing solution, you can accelerate the process. It requires minimal manual work to create and send these bills. You’ll save time and ensure immediate delivery of the invoice through digital channels.
Offer Incentives for Prepayments
Another angle is to incentivize early payers. For example, if the customer pays in full within a few days of job completion, you can offer 5% off the job. Make sure this is time-bound and communicate it to the customer from the start.
Schedule Automated Reminders
Do you know when payments are late? One way to keep on top of this is by using automated reminders. It may be a feature in your accounting software, or you could set it up on your calendar. Take time every week to look at the state of payments.
This action will ensure you prioritize those that need attention. Then, it’s time to call and email those customers who are behind.
Establish Clear Payment Terms in Contracts, Including Deposits
Every project you work on should have a contract. Within that contract, detail the payment schedule. It can define milestones you achieve in the job and what amount is due after completing them. Note any late fees the customer could incur if they don’t pay on time as well.
The contract should also define the deposit amount. Much of the time, this may correlate to the material costs you need to purchase.
RELATED ARTICLE: How to Ask for a Deposit ‘Politely’ as a Contractor
Accept Digital Payments
Providing the convenience of digital payment methods improves your chances of preventing late payments. Most people use online payments, so you don’t have to change behavior. You simply have to provide the option.
Digital payments also reduce or eliminate paper checks. There are hard costs associated with receiving checks. It requires manual work and slows down revenue realization.
Accepting credit card payments requires some setup on your part. Working with a trusted software provider and payment processor makes this a lighter lift.
The results are worth it since digital payments get you the funds quickly. It’s less strain on customers, too, as they can pay online and not have to bother with sending a check in the mail or coming to your office. You’re likely to see late payments decrease.

The Rise of Digital Payment Methods
Consumers have increasingly adopted digital payment methods. It’s now a top preference. In 2023, 69% of American adults used a digital payment method to make a purchase. Many people don’t even have paper checks.
One barrier to this in the past was concerns about security. However, advances in fraud prevention mean that online payments are highly secure. Other features in digital payments have also reduced friction. For example, most allow people to pay without creating an account through a guest checkout.
Another trend of interest is the buy now, pay later (BNPL) model. It’s the digital equivalent of layaway. Lots of consumers are using it as a way to extend payments. It divides the total into installments (usually four) with no interest.
Offering BNPL for jobs could actually help people who have budget concerns. It’s also less complex than a complete financing option.
It’s critical for your business to stay in step with consumer payment preferences. It’s a win-win for you and your customers.
Digital Payment Method Options
You can provide customers with multiple ways to pay digitally. This includes:
- Customer payment portals: Consumers can visit your secure portal and make payments online using debit or credit cards or ACH (automated clearing house) payments. ACH is a bank-to-bank transfer, offering a lower fee than credit or debit cards. To accept these digital payments, you’ll need a compliant merchant processor.
- Mobile payment apps: These apps are payment gateways and also include digital wallets. Examples are PayPal, Venmo, Apple Pay, and Google Pay.
- Digital cards: Financial institutions directly issue credit, debit, or prepaid cards to a mobile wallet.
- Contactless payments: These are touch-free digital payments that use radio-frequency identification or near-field communication to complete transactions.
FROM ONE OF OUR PARTNERS: How to Set Up an Online Payment Form
The Benefits of Digital Payment Methods for Contractors
Digital payment methods can help reduce late payments. What other benefits can you realize?
Fast, Efficient Transactions
Digital payment methods make transactions quick and simple. There’s no additional work on your end, which checks require. There’s no manual work, and you can have the money in your bank in as little as a few days.
Secure Payments
By using a compliant digital payment system, you can also be confident that it’s secure, protecting you and your customers from fraud risk. These systems use techniques like tokenization and encryption. Tokenization protects sensitive card data by replacing it with a randomly generated 16-digit number called a token.
Convenience for Customers
Today’s consumers prefer to pay digitally. It’s quick and easy for them to enter their card details or use a payment app.
Integration with Accounting Software
By using digital payment methods for your contracting business, payments can be reconciled with your accounting software. Much of the time, this is completely automated, which means much less work for you.
This connection also provides you with full visibility into your finances, so you know what’s due, paid, and late. In addition, it offers these benefits:
- Data syncs in real time, so it’s always accurate.
- Everything about your business’s finances is in one place, making your life much easier at tax time.
- There’s no need for duplicate data entry.
Eliminating Costs Associated with Paper Practices
Did you know that the cost to receive a paper check is $1 to $2 per check? There are multiple steps required for this. It’s inefficient and expensive.
If you’re still using printed and mailed invoices, you have more costs related to paper, ink, and postage. You can also expect to wait weeks to receive payment.
Going digital in how you invoice and receive payment eliminates all these expenses and work for you. Transitioning to an electronic payment system doesn’t have to be a long or complex process. Such a solution can also be flexible in how you use it.

5 Quick Tips to Get Started with Accepting Digital Payments
If digital payments sound like a smart move for your business, start with these tips.
- Review invoicing and payment systems designed for small businesses like yours. You don’t need something overly complex.
- Learn about the fees associated with accepting digital payments, specifically those for credit cards. You’ll need to evaluate processing, assessment, interchange, and any other “hidden” fees to determine what you’ll have to pay on transactions.
- Assess options to cover costs for online transactions by charging convenience fees or using surcharging. If you opt for this, make sure you’re compliant with all rules and regulations.
- Seek advice from peers on what digital payment methods they use and recommend.
- Consider offering payment options like BNPL. It could be a differentiator for your business and make projects more accessible for consumers.