The construction industry is tough. You’re juggling bids, materials, labor, and a million other things. But for many business owners, the biggest challenge of all is keeping a steady flow of cash coming in. Sound familiar? Toward relief, one area for your focus this year is setting a realistic goal for reducing outstanding day sales.
Focus On The Obvious: Get Paid Sooner
Decreasing the time it takes to get paid for work completed makes a real difference in cash flow. Though it may seem obvious, improving invoice accuracy and timing, as well as tightening up your procedures for signing on clients, can curtail typical cash flow woes, as Investopedia points out: “Having a goal greatly increases the odds of success. The average number of days it takes to get paid in construction is between 60 and 90. Strongly consider setting a realistic goal to reduce that number to 50 days. You can do this by sending invoices immediately, offering payment incentives, writing clear terms, checking credit reports before making any deals, and restructuring terms with non-payers.”
As you focus on making invoicing a cash flow driver instead of a drain, strive to be as clear and detailed as possible, keep your eye on the calendar, and make it easy for customers to pay you. Here is a round up of 8 tips from experts to keep front and center as you improve your approach to getting paid:
- Line-item everything: Don’t just lump costs together. Clearly list labor, materials, permits, everything. This builds trust and reduces client questions that delay payment.
- Use plain language: Avoid jargon your client may not understand. “HVAC rough-in” is less clear than “Installing ductwork for heating/cooling”.
- Include project specifics: Invoice number, client name, project name/address, dates of work… the more info, the less likely it’ll get lost or ignored.
- Invoice ASAP: Don’t wait until the end of the month. The sooner it’s in their hands, the sooner the clock starts on their payment terms.
- Set clear due dates: “Net 30” is common, but consider shorter terms (Net 15) or staggered payments for large projects.
- Send reminders: Polite but firm reminders before the due date can prevent late payments.
- Offer Multiple payment options: Checks are classic, but offer online payments, credit card processing (even if there’s a small fee), whatever makes it convenient.
- Give Clear instructions: Don’t just put your bank details, provide exact instructions on how to pay each method you offer.
For more best practices and help with construction invoicing, consider Buildertrend
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