Do you have effective processes in place for improving cash flow? As you know, accelerating cash collections is a crucial component. Here are three helpful management techniques to consider:
1. - Attend Pre-Construction Meetings
Get answers regarding payment processing so you are prepared.
- When to bill each month
- How many days for payment cycle
- Discuss the billing breakdown for the schedule of values or billing line items
- Discuss procedure on billing for “stored materials”
- Discuss process of handling change orders should they arise
- Ask for early release of retention money or reduction in retention percent
- Develop a good relation with the person responsible for issuing payments
- Ask if checks can be picked up in person instead of being mailed
2. - Act on Preliminary Items Immediately
- Sign and return contract
- File Preliminary Lien Notice
- Submit insurance certificates for Workers Comp and liability
- Submit bonds when applicable
- Shop drawings, submittals etc.
- Determine method for acquiring billing percentages
3. - Discuss Job Requirements with Subcontractors & Vendors
- Issue subcontracts / purchase orders where applicable
- Obtain insurance certificates as necessary
- Clarify pay when paid policy and make it clear to your vendors and subcontractors the number of days it will take to process their payments once you have been paid on the project.
- Check the project specifications for details and use the maximum number of days to pay your vendors whenever possible.
- Incorporate retention withholding policy with subcontractors
Many contractors struggle with cash flow - juggling payments due with revenue received - and often come up short. It seems to be the nature of the beast. If you’re in this situation and want to effectively change it, you need to explore the benefits of construction software reporting. Here are five compelling reasons to consider:
