Maintaining stability in any construction company is essential, especially in cash flow. Without it, construction companies cannot operate and start new projects, let alone give their workers just compensation. But with a proper and stable cash management approach, a company can avoid a myriad of business complications.
To give you an idea, you need to be aware of some common cash flow issues in construction and the use of home building estimating software. By knowing these concerns, you are positioning yourself to create prevention and allow improvement in your construction company’s cash movement.
Slow Paying Clients:
As we all know, when clients in any business fail to give their payments on time, the business suffers. The same is very accurate with construction companies. When this happens, the outflow of cash exceeds the inflow.
The solution: Clients should pay within the said time frame on the billing document. Construction and engineering companies wait 66 days to receive compensation for their service that meets the final payment terms. Aside from that, companies can give incentives to clients for early payments.
Delayed Invoicing:
Sometimes, the problem is not with the client because sometimes it’s in the delayed issuance of an invoice. The longer it takes, the longer time it also brings to get paid and get the project rolling.
The only way to solve this is through consistent billing. Effective invoicing is a company’s way to improve better cash flow. Create an invoicing schedule for a fast and effective way to organize and monitor billing schedules and company money. If you do invest in construction estimating software, that would also be a big help in creating an invoice for your clients.
Lack of Upfront Payment:
Most clients may now know that even before a project starts, costs may already start to kick in. Supplies and equipment are usually what upfront payments are for. Construction companies must explain this to their clients to understand why advance payment is needed. It is always to cover the procurement costs.
Check out this infographic by Bizprac and learn more strategies to make better cash flow for your construction company.
