Stability is vital in any construction company, especially regarding cash flow. Why? Because a firm can’t operate or start new projects without it. It is proven that a company can avoid many business problems by having a solid cash management strategy. In this article, let us share with you the typical cash flow problems in construction and how commercial estimating software can help your business cash flow improve.
Slow Paying Clients
We all know that clients who fail to pay their bills on time can cause business problems. Construction companies are no exception to this rule. This concern usually makes the cash outflow exceed the cash inflow, which is a big problem for many firms.
The way to prevent this is for clients to pay within the period stated on the billing document. Engineering and construction companies must wait 66 days before receiving payment for services that meet the final payment terms. Another way to encourage clients to pay is to offer incentives should they make early settlements.
Delayed invoicing:
Sometimes the problem isn’t with the client but rather the delayed issue of an invoice. When this happens, know that it takes longer for a client to pay, and it is more challenging to get a construction project started.
Consistent billing is the only way to fix this problem. A company can improve its cash flow by invoicing effectively. To organize and track your company’s billing, create an invoicing plan. You can also create invoices for clients by investing in commercial construction estimation software.
Lack of Upfront Payment
Many clients now realize that costs can rise even before the project begins. But some people still fail to provide upfront payments that go towards equipment and supplies. To explain why an advance payment is necessary, construction companies should inform their clients that it is to pay for the procurement costs.
In that way, it can prevent shortages in the project and help maximize profits and surpluses there might be.
See this infographic by Bizprac to show you more about increasing cash flow in your construction business.
