When a client in Texas drags their feet on a progress payment, you act as an unsecured lender for their project. Every day that invoice sits unpaid past its net terms, your cash bleeds out as carrying costs. Understanding the state's prompt-payment statutes and allowable interest rates is fundamental for protecting your operating margins.
Under the Texas Prompt Payment Act (Property Code Chapter 28), private project owners must pay prime contractors within 35 days of receiving a written payment request. Prime contractors must then pay their subcontractors within 7 days of receiving payment from the owner.
Maximum Allowable Interest (Private): 1.5% per month (18% annually)
For public projects (Gov Code 2251), the government entity must pay the prime contractor within 31 days. Prime contractors have 10 days to pass payment down to subcontractors.
Maximum Allowable Interest (Public): Wall Street Journal Prime Rate + 1%
Consider a scenario where you are owed $50000 on a completed milestone, and the payment is 30 days past the statutory deadline or your contract terms. Based on common statutory limits, the carrying cost you might legally be entitled to recover can accumulate quickly. For example, if you applied an appropriate rate under Texas law, the delay could cost the client an additional $750.00 in interest.
You aren't just slapping an arbitrary fee on the invoice; you are recovering the actual financial damage caused by the delay, backed by state legislation.
To protect yourself, your master service agreement must include a clear, unambiguous clause regarding late payments. A recommended practice is to cite the maximum allowable rate under Texas law as a cap, defaulting to the statutory rate if your contract rate is deemed usurious.
Interest terms must be consistently communicated. They should be printed on every single invoice you send, typically near the total due. Using a clear internal standard operating procedure (SOP) ensures these rules are applied objectively, removing emotion from the collections process.
Ops Signal Scan
A fixed-scope 72-hour reliability scan for one agent workflow, including evidence gaps, three ranked fixes, and a signed action-receipt artifact.
$149Buy the scan securely with Stripe