The construction cash-flow playbook: retention, CIS and getting paid

You did not pick up a shovel to spend your evenings chasing invoices. You are good at the work itself: quoting fairly, turning up, and seeing the job through properly. Getting paid for it should be the easy part, and too often in construction it is not. The money sits somewhere up the chain while your own suppliers are waiting on you, and the cash flow becomes as much a project as the build itself.

It does not have to be this painful. This is a practical, no-nonsense playbook for getting paid in UK construction: retention, CIS, applications for payment, and the polite-but-firm chase that actually works on a main contractor without souring the next job.

Why construction cash flow is its own beast

Most "get paid faster" advice is written for a florist with a Stripe link. Construction is a different animal:

• You are paid in stages, not in one go. Applications for payment, valuations, certificates. Miss a date and you wait a whole cycle.
• Retention holds back money you have already earned. Typically 3 to 5 percent, released in two chunks, and the second half can sit there for a year or more after you have left site.
• CIS takes a slice at source. Under the Construction Industry Scheme, contractors deduct 20 percent (or 30 if you are not verified) from your labour before it reaches you.
• The chain is long. Client, main contractor, you, your subbies. Everyone is waiting on the person above them, and rolling the pressure downhill.

None of this is in your head. Late payment costs the UK economy around £11 billion a year and helps close roughly 38 small businesses every single day, on the government's own figures. And construction's retention system alone ties up somewhere between £1.6 billion and £3 billion of contractors' cash at any one time. That is not a you problem. That is the industry.

Get your dates straight (the Construction Act is on your side)

The Housing Grants, Construction and Regeneration Act gives you the right to a clear payment mechanism. In plain terms:

• Every payment needs a due date and a final date for payment.
• The payer must issue a payment notice saying what they will pay. If they want to pay less, they have to serve a pay-less notice in time. Miss it, and the "notified sum" (usually your application) becomes payable in full.

Translation: if your application is in, and no valid pay-less notice landed by the deadline, they owe the lot. Knowing your dates turns "chasing a favour" into "collecting what is contractually due." That is a stronger position, and it changes the tone of the conversation.

Retention: the money you cannot see

Retention is the classic construction gut-punch. You have handed over a finished job, and 5 percent of it is still on someone else's books. And you are not being paranoid about it going missing: government research found around 44 percent of contractors had retention money they were owed go unpaid over a three-year stretch, usually because someone further up the chain went bust before releasing it.

The trick is not to let it drift into the "we will sort it eventually" pile:

1. Log every retention as its own debt the day it is withheld, with the release date and trigger (practical completion, end of defects period).
2. Diarise the release dates. The single biggest reason retention goes unpaid is that nobody on your side is watching the calendar. The main contractor certainly is not reminding you.
3. Chase it like a real invoice, because it is one. A calm "the defects period ended on the 3rd, please release the retention of £4,200" beats silence every time.

The chase that works on a main contractor

Here is the bit everyone gets wrong. You do not want to be the mardy subbie who kicks off over every invoice, because you want the next job. But roll over and you will be the last one paid, every time. The sweet spot is polite, firm and relentless:

• Before it is due: a friendly nudge that the application is in and the payment date is coming. Removes the "lost in the system" excuse.
• Day it is late: a short, warm reminder. No threats. Just "morning, invoice 1042 was due yesterday, can you confirm it is in this run?"
• A week late: pick up the phone. One call collects more than ten emails, and site offices respond to a voice.
• Two weeks plus: reference your rights. You can add statutory interest and a fixed fee (see below). You rarely need to charge it. Mentioning it, professionally, is usually enough.

The magic is consistency. Chase every invoice the same way, every time, and word gets round that you are the one who always follows up. Funny how those firms get paid on time.

What you can legally charge

If a commercial customer pays late, the Late Payment of Commercial Debts Act lets you charge:

• Statutory interest of 8 percent plus the Bank of England base rate, per year, on the overdue amount.
• A fixed recovery fee: £40 for debts under £1,000, £70 up to £10,000, and £100 above that.

You do not have to charge it. But you are entitled to, and quietly having it in your back pocket shifts the balance. A line like "we are entitled to statutory interest on this, but we would rather just get it settled" is firm without being a threat.

The rules are shifting in your favour

The government has announced the biggest crackdown on late payment in 25 years, the "Time to Pay Up" reforms: a 60-day cap on payment terms, mandatory interest on late payment, and a plan to ban retentions in construction altogether. It is not law yet. But the direction of travel is clear: getting paid on time is becoming the default, not the fight.

Stop chasing from the cab

Here is the honest bit: none of this is hard. It is just relentless, and you are on site, not sat at a desk with a spreadsheet. The chasing is what falls off the list when the job runs late and the phone is already ringing.

That is the job we built Penny for. She is an AI credit controller who watches every invoice and retention, sends the right nudge at the right time from your own business, and actually rings the ones who go quiet, politely, professionally, on your behalf. You set the tone. She does the graft while you are on the tools. When someone claims they have already paid or wants to argue the toss, she stops and flags it to you, rather than steaming in.

You did the work. Getting paid for it should not be a second job.

Frequently asked questions

Can I chase retention before the defects period ends?

You can flag it and confirm the release date, but the money is only due once the trigger (practical completion or end of the defects period) is met. Track the date and chase the moment it passes.

Should I really charge statutory interest to a main contractor I want to keep working with?

Usually you do not need to charge it. Knowing your rights and mentioning them calmly is often enough. Reserve actually applying interest for the ones who take the mick repeatedly.

What if there is a genuine dispute over the work?

Sort the dispute on its own track, in writing, fast. Do not let a snag over one item freeze payment on everything else. A clear payment mechanism and clear notices keep the undisputed money moving.

How do I chase without looking desperate on a small job?

Chase everything the same, calm way, from day one. It is a system, not a strop. Consistency reads as professional, not needy.