Being a contractor in the trades or construction industry has its rewards. You get the flexibility to choose projects, manage your crew, and often earn more than a fixed salary role would offer. But let’s be blunt: one of the biggest risks you face is not getting paid for the work you’ve already completed.
Late payment or non-payment is a nightmare that almost every builder, plumber, electrician, joiner, or subcontractor has either experienced themselves or heard about on site. You put in the hours, you buy the materials, your team works through rain and mud to hit deadlines — and then suddenly, the client delays payment, disputes your invoice, or vanishes altogether.
This isn’t just a minor inconvenience. In trades and construction, projects are cash-heavy. You’re covering labour, plant hire, scaffolding, materials, fuel, and overheads up front. When money doesn’t come in on time, you can’t pay your suppliers, your staff, or even yourself. One big unpaid invoice can cripple a small business.
The good news? There are proven ways to protect yourself. In this guide, we’ll look in depth at how construction and trade contractors can safeguard their payments, from writing better contracts, to structuring milestone payments, to using escrow schemes such as the Construction Payment Scheme to lock down client money before a single brick is laid.
Why Contractors in Trades and Construction Are So Exposed to Non-Payment
Construction is notorious for payment issues. Unlike digital industries where projects can be delivered remotely with low overheads, trades and building work demand heavy investment before you ever see a penny.
You’ve probably experienced some of these common situations:
- Clients stretching terms: A 30-day payment clause quietly becomes 60 or even 90 days.
- Cash flow chain reactions: Developers or main contractors delay paying subcontractors because they haven’t been paid yet.
- Work-first, pay-later models: Many trades are expected to complete whole phases before seeing payment.
- Disputes over quality or scope: Suddenly, a client with budget issues finds “snags” to avoid paying.
Example: A roofing subcontractor completes a £25,000 re-roofing job for a property developer. The invoice terms said payment in 30 days, but 45 days later the developer claims they are still “waiting on funding approval.” The roofer has already paid his crew, bought tiles, and covered scaffolding hire. He’s effectively bankrolling the developer — without interest, without security, and without any guarantee the money will come.
Comparison: Think of it like a builder’s merchant letting every customer walk off with £10,000 worth of bricks and timber, promising to pay “once they’ve sold the house.” It wouldn’t happen. Yet too many trades contractors run their businesses exactly this way.
- Always Work with a Written Contract
Too many contractors in trades still take jobs on handshake deals or vague one-page agreements. It feels simpler, but it leaves you completely exposed. A proper contract is your first and most important shield against non-payment.
For construction and trade projects, your contract should:
- Specify payment terms clearly: e.g., “Payment due within 14 days of invoice.” Avoid vague wording like “payment on completion.”
- Include staged milestones: Break the job into measurable phases with payment due at each stage.
- Cover late payment interest: In the UK, you can legally charge interest under the Late Payment of Commercial Debts Act (8% above base rate). State it upfront.
- Detail dispute resolution: If there’s a snagging disagreement, how is it handled? Spell it out.
Example: A joinery firm signs a £50,000 contract for shop fittings. Instead of agreeing to full payment on completion, they set the structure as 25% upfront, 25% after delivery of materials, 25% after installation, and 25% on sign-off. Even if the client delays or defaults on the final stage, the firm has already secured 75% of their money.
Comparison: A builder wouldn’t lay an entire foundation for free before asking for payment — so why deliver entire projects without securing staged protection?
- Use Escrow Services Like the Construction Payment Scheme
Escrow is one of the most effective ways to protect against non-payment. Instead of relying on promises, the client deposits the money upfront into a secure third-party account. The funds are only released once both parties agree the work has been completed to the agreed stage.
In the UK construction industry, one example is the Construction Payment Scheme, which allows contractors and subcontractors to guarantee that funds are locked down before work starts. This way, you know the money exists, and you don’t waste weeks chasing invoices later.
Benefits of escrow for trades contractors:
- Funds are secured before you pick up a hammer.
- Reduces chasing: You don’t have to send 10 reminders or awkwardly pressure clients.
- Protects both sides: Clients know they won’t release funds until the work is signed off.
Example: A plastering subcontractor agrees to a £10,000 job. Instead of starting on goodwill, the client deposits the funds into an escrow scheme. Once the plasterer finishes phase one, the agreed portion is released. This removes the risk of working for free and strengthens trust on both sides.
Comparison: Think of escrow like asking a trusted friend to hold onto the cash until the job’s done. You’re no longer relying on blind trust.
- Structure Payments Around Milestones
Large projects should never be paid in one lump sum at the end. That’s where most contractors get stung. Breaking projects into milestone payments gives you cash flow throughout the job and reduces risk.
Example payment structure for a £40,000 extension build:
- £10,000 upfront to cover initial materials and planning.
- £10,000 after foundations are complete.
- £10,000 once the structure is watertight (roof and windows in).
- £10,000 after final completion and sign-off.
Even if the client delays or disputes the final stage, you’ve already secured 75% of your money and covered major costs.
Comparison: Imagine if trades merchants let you walk out with materials and only pay once the project was “signed off.” They’d go bust in weeks. Don’t let your contracting business operate that way.
- Vet Your Clients Before You Commit
It’s not just about protecting yourself after the work starts. Protecting your money begins before you even agree to the job. Contractors often feel pressure to accept work, but sometimes saying no saves you thousands.
Practical checks:
- Credit checks: For larger contracts, run a credit check on the company.
- Reputation: Ask other trades on site if the client has a history of paying late.
- Red flags: Hesitation to sign contracts, reluctance to pay deposits, or constant haggling are signs of trouble ahead.
Example: An electrician is offered a subcontract by a developer who promises “plenty of future work.” Before signing, he hears from other trades that this developer has a reputation for paying late. He walks away. Better to miss out on one job than to lose months of cash chasing payments that never come.
- Invoice Immediately and Stay Professional
Even good clients need reminders. Delayed invoices give them excuses to delay payment.
- Invoice the same day work or a milestone is completed.
- Make terms crystal clear (due date, payment methods, late fees).
- Automate reminders using invoicing software like Xero or QuickBooks.
Example: A plumbing contractor invoices for £7,500 immediately after finishing a phase. When the invoice hits the client’s system the same day, it’s processed with the next payment run. Contrast this with sending it two weeks later — suddenly the money won’t arrive until the following month.
Comparison: If you were at a builder’s merchant, you wouldn’t expect them to wait two weeks before billing you. Don’t delay your own cash flow.
- Have a Plan for Chasing Late Payments
Even with all the safeguards, some clients will still pay late. The key is to stay structured and professional.
- Reminder timeline: Friendly reminder at 7 days overdue, firmer reminder at 14 days, then escalate.
- Statutory interest: In the UK, you can add 8% + Bank of England base rate under the Late Payment of Commercial Debts Act.
- Escalation: Use debt collection services or solicitors if needed — especially for larger sums.
Example: A groundwork subcontractor chases a £12,000 invoice. At 14 days overdue, he sends a reminder citing statutory interest. The client pays within 48 hours — simply knowing he was prepared to enforce the law pushed them to act.
- Don’t Rely on One Client
Finally, protect yourself by spreading your risk. Too many trades contractors become reliant on one main contractor or developer. If that client hits trouble, you’re left exposed.
Example: A tiling subcontractor relied on a single developer for 80% of his work. When the developer went bankrupt, he was left with unpaid invoices and no pipeline. If he had spread work across multiple smaller builders, the damage would have been limited.
Comparison: You wouldn’t build a house on a single weak pillar. Don’t build your contracting business on a single client.
Conclusion
Protecting your money as a contractor in trades or construction isn’t about being paranoid — it’s about being professional. You’re running a business, and businesses protect their revenue.
With the right systems in place — strong contracts, milestone payments, escrow services like the Construction Payment Scheme, fast invoicing, and structured follow-ups — you can massively reduce the risk of non-payment. Combine that with vetting clients and diversifying your base, and you’re no longer at the mercy of whether someone decides to “process your invoice this month.”
At the end of the day, every bricklayer, plumber, joiner, or electrician is also a business owner. Protecting your cash flow is just as important as laying solid foundations. Without it, the whole structure collapses. With it, your contracting business is stable, profitable, and future-proof.
