Construction is an industry that is seemingly always experiencing growth, irrespective of the economic climate in which other industries may falter. The reason is obvious, of course: the land is always being developed and buildings built. As long as there is real estate, there will be construction (more or less). One of the major issues that come with this, however, concerns cash flow – as reported by many construction outfits. Here, we detail some of the solutions offered by veteran construction business owners regarding managing cash flow.
In Times of Plenitude, Stock Up on Discounted Supplies
Just like any business, construction has highs and lows. Usually hinging on the prices of stock materials shipped in from overseas, and gas. During times of plenitude (when business is good), if you can find discounts on lumber, concrete, steel, etc, buy more than you need and stock it. When there’s a recession or prices skyrocket, you’ll be ahead of the curve in your business. You can even sell some material to other construction companies. When coupled with a few bridge loans and credit lines, you should be able to weather virtually any storm that would otherwise negatively affect your cash flow.
Invoice Management to Ensure Cash Flow
Essentially, this entails breaking up your invoices more efficiently, so that you have incoming cash as you complete each portion of a long project. The standard method in the industry is to send invoices to the client for 3-4 substantial amounts; by that time, you could be running on fumes as work to get to the next stage of the project. Furthermore, there’s a direct correlation between the size of the invoice, and how long the client takes to pay – some businesses even have to resort to factoring receivables to bridge the gap in positive cash flow.
Contact Summit Commercial Capital today to learn more about cash flow solutions for your business.