Improving Cash Flow in Construction: 6 Tips to Get Paid Faster

Cash flow is the lifeblood of your business. It’s what keeps your construction company thriving and allows you to make growth-focused investments. But when cash flow falters, you’re left with no choice but to cover basic costs and struggle to keep things afloat.

However, there are actions you can take to ensure positive cash flow. You have the power to influence how quickly and reliably your customers pay you. Let’s dive into six practical tips to enhance your construction business’s cash collection and improve cash flow:

6 Practical tips to improve cash collection

Tip #1: Speed up invoicing by automating processes

Sending your customers an invoice promptly is crucial in getting paid faster. Rather than going through a lengthy process of gathering information and sending it to the office, automate it. Leverage technology that enables you to complete all invoicing steps on-site. When you agree on the service and price with your customer, you can instantly send them the invoice.

Tip #2: Automate time collection to ensure accuracy and efficiency

Inaccurate amounts on invoices can delay payments significantly, which impacts a construction company’s cash flow. To avoid this issue, adopt a time and attendance solution that automates both payroll and billing processes. By centralizing time entry and eliminating manual intervention, project managers can minimize errors and save valuable time.

Tip #3: Implement credit limits for customers that cause concern

Unpaid bills from customers can pose a serious threat to your cash flow and project management. Safeguard against this by setting and enforcing credit limits for clients you’re concerned about. Establish a rule that prevents further services if a customer exceeds their credit limit. Additionally, consider conducting credit checks through trusted platforms like DNB. And don’t hesitate to reach out to other construction vendors for insights on a potential customer’s payment history.

Tip #4: Create an accounts receivable dream team to ensure cash flow is always top of mind

No matter the size of your business, it’s always a winning move to have a dedicated group handling your accounts receivable. This ensures that your cash flow is never out of sight, with someone taking charge of key actions, such as:

• Sending statements to customers on time.
• Following up with late-paying accounts.
• Monitoring and reporting on cash flow monthly.

Tip #5: Keep customer credit cards on file or use a lockbox – the choice is yours

To safeguard your cash flow, keep customer credit cards on file while adhering to top-notch PCI compliance practices. This allows you to charge for work seamlessly, without needing to play mobile phone tag with customers.

Alternatively, you can explore using a lockbox to collect payments. With this service, customers can pay bills straight to a special post office box. The bank then collects, processes, and deposits the payment directly into your bank account. It’s as simple as that!

Tip #6: Collect on-site signatures and provide backup documentation to seal the deal

Sometimes, a payment gets delayed past its due date because of customer inquiries about an invoice. That’s why due diligence is key, with additional steps to prevent disputes and minimize impact on cash flow.

First, always collect your customer’s signature right on the spot, whenever a job is completed. On the document, include the date, the service person’s name, and the number of hours spent on the job. This way, you’ll have solid proof that the work was done and witnessed.

Second, bolster your invoices with backup documentation. This can be in the form of photos showcasing the completed work or a comprehensive preventative checklist.

By doing this, if a customer later questions their bill, you’ll have both documents as references. This will help you clearly explain the work performed, eliminating any confusion and unnecessary excuses for delayed payment.

Take These Proactive Steps to Improve Cash Collection for Better Cash Flow

The speed and reliability of your customer payments can either be the backbone of your construction business or a stumbling block that holds you back. It’s crucial to have cash readily available at all times, which is why taking proactive steps to improve cash collection is crucial to better cash flow.

Follow these engaging tips, and watch as your construction cash flow becomes healthier, providing you with greater financial freedom.

Sage Intacct for Construction

Sage Intacct construction accounting software is designed for the complex challenges of construction companies. From compliance reporting to generating accurate job profitability metrics, to providing real-time visibility, Sage Intacct provides general contractors with the tools to improve efficiency and grow profitably.

View the 2-page overview of Sage Intacct: Cloud Financial Management for Construction