How to Get Relief from Cash Flow Issues

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.


Submit a Comment

Your email address will not be published. Required fields are marked *

How Do You Measure Up as a Boss?

How Do You Measure Up as a Boss?

You know how to hire subcontractors and are comfortable telling them what to do. But how are your skills as a boss? It’s a tricky question to answer. In my experience, I’ve found that contractors are often so busy trying to keep up with all the moving parts of a...

The Top 3 Greatest Stress Reliever for Contractors

The Top 3 Greatest Stress Reliever for Contractors

As a contractor, there are a million and one reasons to be stressed at any given time. However, most of that stress comes from the same few problem areas. Things seem to spiral once you get behind, and you might feel like you’ll never catch up. However, there is hope....

Your Worker’s Comp Audit Survival Guide

Your Worker’s Comp Audit Survival Guide

Going through a worker’s compensation audit can be a pain, especially when you’re unprepared. This quick guide will help you gather everything you need for your upcoming audit so you can get through it as smoothly as possible. What is a Worker’s Comp Audit? The...

Are You Charging Enough For Your Services???

Are You Charging Enough For Your Services???

You work hard for your money day in and day out. But are you charging enough for your services? It’s a tricky question to answer. Many contractors lack a solidified fee and payment structure. They don’t consider everything that goes into creating a quote and end up...

5 Easy Ways to Win More Bids

5 Easy Ways to Win More Bids

You might not think of yourself as a salesperson, but as a contractor, your entire business relies on your ability to win a bid. Shortening the amount of time it takes between getting a customer interested and winning a bid (aka, the sales cycle) will give you more...