Cash Flow Strategies for Contractors
Cash flow is the lifeblood of any construction business. Due to the nature of the industry—high upfront costs and slow payment cycles—managing cash flow effectively is critical for survival and growth.
1. Negotiate Better Terms
Don't just accept the standard terms. Negotiate for mobilization costs, faster payment cycles, or deposits for materials.
2. Invoice Immediately and Accurately
Delays in invoicing lead to delays in payment. Use software to generate accurate invoices as soon as milestones are met.
3. Leverage Lien Rights
Sending preliminary notices shows you are professional and serious about getting paid. It often prioritizes your invoices over others.
4. Manage Retainage
Retainage can tie up 5-10% of your contract value. Track it carefully and bill for it as soon as you are eligible.