6 steps to avoiding the cashflow gap

Construction can be a hard game when it comes to cash flow and being paid on time and in full. Cash flow is important for the survival of your business and to ensure you win new projects, have the ability to buy materials and pay your employees. Consider a few tips and ticks to help ensure you are cash flow positive and keeping track of your incoming payments.

1. Be prepared and stick to your schedule

It’s not possible to predict the future but if you play it safe and work smart you can avoid potential unforeseen complications. When planning and reviewing your schedule, be sure not to spread yourself too thin. Consider the projects you’re currently working on and be aware of their completion dates before taking on new work. It’s important to give yourself room to move, you don’t want to take on a job where you’re expected to purchase large amounts of raw material before finishing a project you thought would be completed days ago.

2. Negotiate payment terms


Clients have one expectation of you, complete the job on time and deliver a quality product. Therefore it might be beneficial for you to consider asking for a front-loaded contract. You’ll require cash to complete the project and not having the cash flow could effect the quality of your project. It wouldn’t be unreasonable to ask – you want to avoid being cash flow negative. Try to avoid any possibility of paying business expenses out of your own pocket.

3. Consider incentivising

Offering a discounted rate when paying early or before a certain date could ensure you receive payments on time. Although you might be risking the loss of a small percentage of profit, this would be a lot better than not having cash when required. Late payments run the risk of turning into a forgotten payment.

4. Be smart when hiring


With large amounts of your business’ cash coming from projects in progress it’s important that project managers are smart with cash and good at limiting use and distribution of finances. With this in mind, hire individuals who are cautious when spending and at times prudent when cash flow is limited.

5. Shop around

Material prices can fluctuate, at times this can save you money but also cause you to spend more when prices rise. Ensure that you stay open minded and shop around, new suppliers will enter the market with new prices and new products. Being loyal to your usual supplier can have its benefits but ignoring the potential for cheaper prices from other suppliers could come as a disadvantage to your business by affecting cash flow. Therefore, shop around, compare prices and buy from the supplier who can offer you the best value for your money.


6. Consider invoice clearing services

Invoice clearing services are an option to consider when you require cash flow quickly in order to pay wages, kick start a new project or any business related action that may require you to have current cash flow.

It’s important to understand the terms of the services and its fees, if this quick cash is going to help grow your business then it could be something to think about.

Cash flow is a problem for many businesses within the construction industry, however, if managed correctly, you could avoid this becoming an issue for you. Don’t be put in a compromising situation and have to struggle with issues you didn’t plan for. We’ve created a risk assessment checklist which can help you stay on top of potential issues onsite.

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