How to Deal with Cash Flow Issues in Construction

By: First Union


How to Deal with Cash Flow Issues in Construction

With construction up yet another year, those in the industry have a great opportunity to grow their business with some terrific and potentially lucrative projects. However, many construction owners still find themselves struggling on a day to day basis despite the abundance of prospects out there. Largely, this is because of issues related to cash flow. Cash flow problems are among the greatest challenges faced by construction company owners. So what exactly can you do to get a better handle on your cash flow and thus help propel your construction firm to the next level?

Find More Solid End Clients

Upon going into construction, many are often surprised by the peaks and valleys associated with cashflow. Suppliers need to get paid and yet you haven't yet received your payment from the customer. This then presents a very definite problem. One thing you might do is pay more attention to the caliber of clients for whom you're doing the work. For example, many have found that corporate clients pay more quickly. Even if the jobs are smaller (and sometimes this may be better for your cash flow position/), look for customers who have a track record of paying on time and in full.

Divide Up Invoices

Generally most bills in large installments over the course of the project. However, if cash flow is an issue you may want to take a different approach and bill after each section—smaller invoices, but money coming in more steadily. So, for instance, you might bill after the demo phase, again after rough framing, and then after sheetrock. This also lets the customer write smaller checks over the duration of the project which may work better for them as well.

Take Advantage of Discounts

Very often a vendor will give you discounts for buying in bulk. If you can afford to do so, stockpiling your supplies and thus taking advantage of the discount offered could help you save money and thus increase your overall cash flow. Perhaps you might consider taking out a business loan to help with this. This is where we come in! First Union Lending will work with you as we have numerous flexible commercial financing programs. Call today!

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