TOP 5 STRATEGIES TO BOOST CASH FLOW IN CONSTRUCTION

Running out of cash is not a healthy sign of progress during a construction project. However, with the need to monitor the day-to-day construction operations, managing the expenses of a project can often be overlooked. In such situations, the construction activities may come to a halt due to insufficient funds. This is why managing the cash flow of a project is of great importance in the construction business. With positive cash flow, the contractors, along with the project management, will successfully achieve the formulated plan without landing up in a financial crisis. Positive cash flow indicates that the contractors and the construction crew have enough resources to continue their work, while negative cash flow is an indication of financial mismanagement. Executing a project requires proactive thinking and planning. Let us look at some of the effective tactics that can boost the cash flow in construction.

TOP 5 STRATEGIES TO BOOST CASH FLOW IN CONSTRUCTION

Table of contents:

  • This blog discusses some of the strategies that can be followed to improve cash flow in construction.

Here are the strategies:

Manage your accounts receivables:

Accounts receivables are the money that the customers owe to their company. It is important to have a weekly inspection of your accounts. The contractor in charge of a project should appoint a responsible person to keep an eye on the payment dues. The invoice for the purchase should be generated and sent to the stakeholders at regular intervals as per the agreement. This will ensure financial balance.

Provide multiple payment options:

It is important to provide a host of payment options to your customers. In addition to the conventional forms of payment such as checks and cash, the company should also take the payment apps such as PayPal, Venmo, etc, into consideration to facilitate the transaction between both parties.

Penalties for late payments:


Late or delayed payments can jeopardize the situation at the site. This puts a lot of pressure on the contractors. The company starts to carry customers’ debts, making it difficult to manage the bills. Penalties for late payments can regulate the cash flow. Specify such conditions in the construction contract so that there are no surprises.

Bill in line with the costs:


Sometimes, the contractors tend to invoice for more than customers what is required. This is usually done to avoid late payments and ensure there is enough money for future purchases. However, this can be quite risky if the money is not managed properly. Underbilling is also not a great idea as it can create a negative cash flow in the near term. Therefore, a construction company should bill in line with the actual purchases during the progress of work.

Retainage and tax planning:

Retainage is the sum withheld until the completion of the project by the customers to assure that the construction crew will satisfy the obligations and complete the project. Triggering an early release of this amount as the project nears completion, can ensure that the contractors and subcontractors do not run out of cash. Construction is a long process. Hence, tax planning is important. Understanding tax deferrals and other norms will make it easier to sketch a financial plan.

WHY CHOOSE SREE BOGAR AS YOUR CONSTRUCTION PARTNER?


With a team of exceptional talents aiming to execute magical projects of various styles, Sree Bogar has a specialist team to manage finances and ensure a smooth construction experience. You don’t have to worry about your money! We, at Sree Bogar, make strenuous efforts to formulate a well-structured financial plan, making sure that the needs of the contractors are met without exerting any financial pressure on our clients. Join us today to experience the magic at your construction site!

Contact us now: https://sreebogarprojects.com/projects.html

For more tips to improve cash flow in construction:



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