How do you pay subcontractors without disrupting cash flow?

Business & Financial Management for Contractors
1

Juggling subcontractor payments and maintaining steady cash flow is tricky. I’ve tried different approaches, but it’s still a balancing act. Some months are smoother than others.

Curious how other solo operators handle this. What’s your strategy for keeping everyone paid without draining your own reserves?

2

I’ve been there, and it’s definitely a challenge. Here’s what’s worked for me:

I set up a separate bank account just for subcontractor payments. Every time I invoice a client, I put a percentage (usually around 30%) into this account. It’s hands-off money - I don’t touch it for anything else.

I also negotiate payment terms with subcontractors. Most are cool with net 30 or even net 45. This gives me a buffer to collect from clients before I need to pay out.

Another thing that’s helped is offering a small discount (like 2-3%) for subcontractors who invoice quickly. It motivates them to bill me right away, which helps me plan better.

Lastly, I’m upfront with clients about my payment schedule. I make it clear that prompt payment on their end directly impacts my ability to pay my team. Most clients get it and are pretty good about it.

It’s not perfect, but this system has kept things flowing pretty smoothly for me. Hope this helps!

3

I’ve tweaked my system over time. Here’s what’s working for me:

  • Set milestones for subcontractor pay. They get a chunk when the project starts, another mid-way, and the final bit at completion.
  • Use a separate savings account. I toss 25% of each client payment in there as my subcontractor fund.
  • Negotiate longer payment terms with reliable subs. Some are cool with 45 or even 60 days.
  • Be upfront about cash flow with everyone. Both clients and subs appreciate the honesty.
  • Offer early payment discounts to clients. Even a 2% off can motivate them to pay faster.

It’s not perfect, but it keeps things moving without too much stress. Cash flow’s always a juggle, but this helps smooth it out.

4

I keep it simple. My subcontractors invoice me after the job’s done, and I pay them when the client pays me.

I’m clear about this upfront, so everyone’s on the same page. If a client is slow to pay, I let the subs know.

This way, my cash flow stays steady and I’m not out of pocket.

5

I don’t mess with fancy systems. Just pay subs when the job’s done and I get paid. Keeps it simple for everyone. No stress about cash flow that way.

6

I pay when I get paid. Tell subs upfront. Works okay for me so far.

7

Pay subs when the client pays. Simple as that. I tell them straight up how it works before we start. If a client drags their feet, I let the subs know what’s up. No fancy tricks or separate accounts needed. Just keep the money flowing through as it comes in. This way, I’m not fronting cash I don’t have, and everyone knows the score. Been doing it this way for years without issues. Keeps my books clean and my stress level down. Just make sure you’ve got solid contracts in place so everyone’s clear on the terms.