A construction business faces many different challenges. Even if a company is fortunate enough to secure a large contract, this could place them under significant stress and worry. There is one general reason for this: cash flow.
The construction industry is notorious for cash flow issues. This isn’t good. Failure to pay for everything from materials to salaries on time can impact the ability to complete projects sufficiently and within set deadlines.
To avoid that type of scenario, here are five tips to improve the cash flow of your construction business. Make use of construction finance
Make use of construction finance
Known as construction invoice finance, this is one of the savviest methods for instantly improving a company’s cash flow. When used, you receive an instant cash injection, which can be used for any purpose, whether paying for materials or covering the monthly wage bill.
Construction finance is offered by a select number of lending specialists, which you can find with the help of brokers. Any payment provided by a lender is secured against unpaid invoices. This means you don’t necessarily have to wait for customers to settle their bills before you receive payment, which helps keep the money coming in and improves cash flow.
Plan Your Future Finances
Making projections about your future finances isn’t easy. Even if you have secured a long-term contract, it can be challenging to forecast how expenses can change daily. Nevertheless, getting a general idea about your future income and expenses would be best.
With this knowledge, it is easier to project your cash flow in the future. You are better positioned to prevent payment and payroll issues by anticipating certain events before they occur.
Shop around for the best prices
Are you getting the best prices from your suppliers? While this may have been the case when you first started, the situation may have changed significantly in the current climate. Other suppliers could have more competitive prices and terms, which can help your business in more ways than just cash flow. With that said, freeing up cash and spending fewer assists with ensuring less money is tied up in your supplies.
Send out invoices ASAP
It goes without saying that invoices are an essential element of cash flow. The quicker you receive money from customers, the less likely you are to suffer from cash flow problems.
The good news: thanks to modern technology, you don’t have to send out these invoices manually. You can use software that automates the task, ensuring invoices are sent to customers immediately.
Reduce the time it takes to be paid
This may seem easier said than done. However, reducing the days customers take to settle their bills is possible. Aside from sending out invoices immediately, you can also provide incentives to get customers to pay quicker than normal. Furthermore, you can include clear terms and conditions and check credit reports to ensure customers are in the right place to pay on time.