This prompt payment act best practices checklist gives general contractors a step-by-step compliance tool for every payment cycle. The Associated General Contractors of America found in 2025 that GCs who follow a standardized payment checklist reduce prompt payment violations by 78%. That translates to an average savings of $47,000 per year in avoided penalties and legal fees.

Print this checklist. Post it in your accounting office. Review it on every project.

Pre-Project Setup Checklist

Before the first invoice arrives, your prompt payment process needs a foundation. Complete these items during project startup.

Identify the applicable statute. Determine whether the project is federal, state public, or private. Look up the specific prompt payment statute that applies. Record the payment deadline, interest rate, retainage cap, and dispute notice requirements.

Configure your accounting system. Set up the project in your accounting software with the correct state-specific payment deadline. Build automated alerts at 5-day, 2-day, and day-of intervals. Create separate line items for progress payments and retainage.

Review subcontract payment terms. Verify that your subcontract payment language matches or improves on the statutory deadline. Remove any pay-if-paid clauses in states that prohibit them. Define the invoice submission format and schedule.

Train the project team. Brief the project manager, superintendent, and project engineer on the payment deadline, invoice review responsibility, and dispute notice requirements. Document the training date and attendees.

Setup Item	Responsible Party	Deadline	Completed
Identify applicable statute	Project Manager	Before first invoice	_
Configure accounting system	Accounting Manager	Before first invoice	_
Review subcontract payment terms	Project Manager + Legal	Before contract execution	_
Train project team	Project Manager	Before first invoice	_
Set up retainage tracking	Accounting Manager	Before first invoice	_
Create dispute notice templates	Project Manager	Before first invoice	_

Invoice Receipt and Review Checklist

Follow these steps every time a subcontractor invoice arrives.

Log the receipt date and time. Record when the invoice was received, by what method (email, mail, portal), and who received it. This date starts your review clock.

Verify invoice completeness within 48 hours. Check that the invoice includes the contractor name, address, license number, invoice date and number, contract and change order references, schedule of values breakdown, period covered, and supporting documentation.

If the invoice is incomplete, send written notice to the sub within 7 days (federal) or the state-specific notice period. Specify what is missing. The payment clock pauses until a corrected invoice arrives.

If the invoice is complete, forward to the project manager for technical review within 24 hours of receipt.

Project manager reviews within 48 hours. Compare invoiced quantities to field reports. Verify that work described matches completed work. Check stored materials documentation. Flag any disputed items immediately.

Approve or dispute within the notice period. If all items are approved, forward to accounting for payment processing. If any items are disputed, send written dispute notice to the sub and forward the undisputed amount to accounting.

Payment Processing Checklist

After invoice approval, accounting processes the payment against the statutory deadline.

Calculate the payment deadline. Start with the owner payment receipt date. Add the statutory number of days. Subtract weekends and holidays if your state statute excludes them. This is your hard deadline.

Verify available funds. Confirm that the owner payment covers the approved sub invoice amount. If the owner payment is partial, determine which subs to prioritize based on contract terms and prevailing wage project requirements.

Process payment. Cut the check, initiate the wire, or submit the ACH payment. Record the payment date, method, amount, and reference number.

Confirm delivery. For checks, record the mailing date and method. For wires and ACH, save the confirmation receipt. For hand-delivered checks, obtain a signed receipt.

File documentation. Store the invoice, approval record, payment record, and delivery confirmation together. These documents form your compliance audit trail.

Retainage Management Checklist

Retainage requires its own tracking process separate from progress payments.

Record each sub's scope completion date. When a subcontractor finishes all work in their scope, document the completion date, the punch list status, and the inspection results.

Calculate the retainage release deadline. Add the statutory release period (typically 30-60 days) to the scope completion date. This is the deadline for releasing retainage to that specific sub.

Process retainage release. Release the retainage amount within the statutory window. Do not wait for overall project completion unless the statute specifically ties release to project completion (most do not).

Document the release. Record the retainage amount released, the release date, and the basis for calculating the deadline. Save the sub's final lien waiver with the retainage release record.

Dispute Documentation Checklist

When you need to withhold payment, proper documentation protects you from prompt payment penalties.

Send written dispute notice within the statutory period. Most states require notice within 7-15 days of receiving the invoice. The notice must identify the specific invoice, the specific line items disputed, and the specific reasons for each dispute.

Pay the undisputed portion on time. Process payment for all approved line items by the statutory deadline. Only withhold the disputed amount.

Document the resolution timeline. Set a 30-day target for resolving the dispute. Schedule a meeting with the sub within 10 business days. If the dispute requires third-party assessment, arrange the assessment within 15 business days.

Close the dispute. When resolved, process payment for the agreed amount immediately. Calculate and pay any interest owed on the disputed portion if the resolution favored the sub. Update your records with the resolution date and terms.

Monthly Audit Checklist

Run this audit on the first business day of every month.

Pull all payment records from the prior month. List every sub payment with the owner receipt date, statutory deadline, actual payment date, and compliance status (on time or late).

Calculate interest owed on any late payments. If any payments missed the deadline, calculate interest at the statutory rate from the deadline to the payment date. Process interest payments proactively.

Review retainage balances. List every sub with outstanding retainage. Check whether any sub's scope completion date has passed the retainage release threshold. Escalate overdue retainage releases immediately.

Update compliance scorecard. Track your on-time payment percentage, average days to payment, and total interest paid. Report these metrics to project leadership monthly.

FAQs

How often should GCs run a prompt payment compliance audit? Run the full audit monthly. Weekly spot checks on active payment cycles add an extra layer of protection. Quarterly reviews with legal counsel help identify systemic issues that monthly audits may miss. The monthly cadence catches most violations before they compound.

What documentation should the checklist produce for legal defense? A complete prompt payment record includes the owner payment receipt with date, the sub invoice with receipt date, the approval or dispute notice, the payment record with date and method, delivery confirmation, and any dispute correspondence. Courts require proof of each date in the payment chain.

Can this checklist work for GCs operating in multiple states? Yes. The checklist structure stays the same. The specific deadlines, interest rates, and notice periods change by state. Build a state reference card that lists the statutory window, interest rate, notice period, and retainage rules for each state where you operate. Reference the card when completing the checklist.

How does the checklist handle progress billing vs. milestone billing? The checklist applies to both billing methods. For progress billing, the invoice arrives monthly and the payment deadline runs from owner receipt date. For milestone billing, the deadline starts when the GC receives payment for the specific milestone. The review and documentation steps are identical.

What software supports this checklist workflow? Construction accounting platforms like Sage 300, Viewpoint Vista, and Procore support automated deadline tracking. Dedicated compliance platforms like SubcontractorAudit add state-specific rule engines, automated alerts, and audit-ready reporting. The minimum technology requirement is an accounting system that logs dates and calculates deadlines automatically.

Should GCs share this checklist with subcontractors? Yes. Sharing your prompt payment process with subs sets clear expectations for invoice format, submission timing, and dispute resolution. Subs who understand your process submit cleaner invoices and resolve disputes faster. Transparency builds trust and reduces payment-related conflict.

Track Every Deadline Automatically

SubcontractorAudit automates prompt payment deadline tracking, generates compliance alerts, and produces audit-ready reports for every project. Request a demo to replace manual checklists with automated compliance.