Not having enough cash on hand is a common issue for contractors, even those who are profitable. Recent research from PwC shows that it takes an average of 83 days for contractors in the construction industry to get paid, which is the longest time between completing a project and getting paid out of every other industry in the world.

Getting paid at such a slow rate can cause massive disruptions for your business. It can be challenging, or sometimes impossible, to pay suppliers and subcontractors when you don’t have enough cash on hand. You might even miss paying yourself from time to time as you wait for money to roll in.

Get Cash Flow Relief as a Contractor

The first step to improving your cash flow as a contractor is keeping track of your finances. Putting a system in place that shows you exactly how much money you have on hand right now and when you can expect to get more in can help you make more informed business decisions. 

The next step is to figure out how to keep more cash in your business by using these solutions.

Rethink your payment terms

You shouldn’t be paying the total costs of the project upfront. That sort of plan will significantly eat into your cash flow and cause problems down the road. Take a look at your payment terms and figure out how you can make them fair for you and your customers. Many contractors request payment on a regular cadence, such as monthly or bi-weekly, or upon completing milestones.

Make it easy to get paid

The small fee you get charged for accepting credit card payments is a whole lot less than it costs not to get paid at all. Make it as easy as possible for customers to pay you using credit cards, cash, checks, and online payment portals like PayPal.

Reevaluate your prices

Are you charging enough for your projects? Many contractors are still charging the same for projects as they did when they first started. Reevaluate how much it costs you for materials and labor and raise your prices as needed to ensure you are still getting a healthy profit margin for your work.

Embrace financing

Finance everything you can so you can have cash on hand for emergencies and payroll. That means using credit cards and taking out a credit line with your bank to cover costs for suppliers and vendors.

Automate invoicing

Customers aren’t going to pay if you don’t invoice them. Set up an automated invoicing system that sends invoices immediately after a project or milestone is completed. This closes the gap and decreases the amount of time until you get paid.

You Don’t Have to be Cash Strapped Forever

A lot of contractors operate job to job, borrowing money from one project to pay for another. While common, this is an unsustainable method that will leave you feeling stressed and anxious.

Improve your cash flow by doing everything you can to keep money coming into your business. I can help you set up a system that ensures you have enough cash on hand to cover your expenses every month without worrying about how you’re going to make payroll. Contact me today to schedule a free strategy session.