{"id":744,"date":"2020-09-12T00:00:00","date_gmt":"2020-09-12T04:00:00","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/cash-is-king-and-in-construction-dont-forget-it\/"},"modified":"2026-04-08T09:03:17","modified_gmt":"2026-04-08T13:03:17","slug":"cash-is-king-and-in-construction-dont-forget-it","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/cash-is-king-and-in-construction-dont-forget-it\/","title":{"rendered":"Cash is king . . . and in construction, don\u2019t forget it"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tMoney Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tCash is king . . . and in construction, don\u2019t forget it\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t

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\n\t\t\t\n\t\t\t\t\"\"\t\t\t\tStacey McIntosh<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n

Inadequate cash flow is one of the major reasons construction companies fail. It\u2019s also the main worry keeping financial managers up at night. Cash flow can be doubly difficult to manage in construction because each project is typically unique with different contract and payment terms.<\/p>\n\n\n\n

But there are ways you can better manage and maintain a strong cash flow. Here are a few basic tips:<\/p>\n\n\n\n

Bill early, bill often<\/strong><\/h2>\n\n\n\n

Bill as soon as possible<\/a> to help set your customers\u2019 payment expectations and demonstrate your professionalism. More frequent billing also results in smaller invoices, which makes it easier for your customers to make payments. You\u2019ll also find out sooner if your customers are having financial problems so you can take appropriate measures on your end.<\/p>\n\n\n\n

Pay early, pay often<\/strong><\/h2>\n\n\n\n

Pay your bills<\/a> weekly to take advantage of early pay discounts and to please your vendors and subcontractors with prompt payment. By paying early you also set yourself up to receive the best service from materials suppliers and subcontractors who want to do business with you.<\/p>\n\n\n\n

Use progress (AIA) billing<\/strong><\/h2>\n\n\n\n

When negotiating your contract, ask to use percentage of completion (progress or AIA) billing instead of fixed draws based on completed project stages. Progress billing enables you to send invoices on a regular basis that more closely matches your need for cash. And if the project is held up, you can still bill and get paid for the work completed to date.<\/p>\n\n\n\n

Remind your customers to pay<\/strong><\/h2>\n\n\n\n

Your cash flow depends on getting paid in a timely manner<\/a>, so don\u2019t be shy about asking for the money that\u2019s due to you. Many contractors worry they\u2019ll damage customer relations by asking too assertively to get paid. But a friendly reminder can be a help to both parties. An end-of-month statement summarizing outstanding amounts is a good way to gently remind your customers of their obligations.<\/p>\n\n\n\n

Collect the money that is owed you<\/strong><\/h2>\n\n\n\n

In addition to reminding your customers to pay, you need to develop regular (weekly) procedures for monitoring and collecting your accounts<\/a> receivable. Begin investigating as soon as invoices become past due. Many customers, rather than telling you about a problem they\u2019re having with your work, simply don\u2019t pay\u2014and the older an invoice gets, the harder it is to collect. Be certain to document all conversations with customers and project managers regarding past due invoices.<\/p>\n\n\n\n

Accept electronic payments<\/strong><\/h2>\n\n\n\n

By accepting more electronic payments\u2014whether a debit\/credit card, ACH payment, or a scanned written check\u2014you can significantly reduce payment cycles. And, if you integrate a payment system with your accounting software, you can also eliminate the extra step of manual payment data entry.<\/p>\n\n\n\n

Put your excess cash to work<\/strong><\/h2>\n\n\n\n

Have excess cash at the end of the day? Many banks offer a \u201csweep account,\u201d which automatically transfers amounts that exceed a certain level into a higher interest option. Talk to your banker to see what\u2019s available.<\/p>\n\n\n\n

Even today with more work flowing into many construction companies, a focus on your cash flow is critical. Contractors who know how to manage their cash flow are better positioned to weather the bad times, take advantage of booming work, and successfully stay in business for years to come.<\/p>\n\n\n\n

If you are interested in learning how construction software can help you better manage your cash follow, please visit us at Sage 100 Contractor<\/a> or Sage 300 Construction and Real Estate<\/a>.<\/em><\/p>\n\n\n\n

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Browse more topics from this article<\/h3>\n\t\t\t<\/div>\n\t\t\t
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