Cash Flow Dos and Don’ts for Construction Business Owners 

Managing cash flow efficiently is at the heart of any successful construction business. However, it can be extremely challenging for any firm to stay on top of income and outgoings if there isn’t an efficient accounting system in place and the majority of the time is taken up working on projects and boosting growth.

Here, we offer up cash flow strategies for keeping your business financially healthy, protecting your firm from possible payment disputes and unhappy clients, and enabling you more time to do the work you love. 

Do create a concise client contract and stick to it

Before you start any work, it’s crucial that you devise a client contract that clearly states the details of the project and how you would like to be paid. Whether you prefer staged payments or milestone payments, it’s important to choose a payment schedule that supports your firm’s cash flow and is agreed by the client.

The client contract should also cover the details of any financial penalties and dispute resolutions if your client doesn’t pay. This will cover your back should you decide to take legal action. 

Don’t be afraid to check your client’s financial status 

A building project can be a huge financial investment for homeowners, particularly when costs can escalate unexpectedly. It’s therefore understandable that there may be times you need to confirm the financial status of your client, so you can be sure they will be able to pay for the huge investment.

Consider using an expert agency to investigate your client’s finances, or help chase any late payments. 

Do make it easy for homeowners to pay on time

We all know life can get busy, but when it gets in the way of clients staying on track of scheduled payments, this can impact a construction firm’s cash flow. To avoid this issue, a simple online billing process will allow clients to pay easily and conveniently, ensuring timely payments. 

Not only will an efficient online payment system eliminate the awkwardness of asking clients to write a check, you’ll never have to wait for another check to clear.

Houzz Pros online payments ensures you get paid fast by giving clients the ability to pay instantly by credit card or wire transfer. Efficient invoicing software and online payment processes will save you precious time, allowing you to concentrate on your projects and clients.

Do get an efficient online accounting system

If you’re not managing your own invoices, payment plans and cash flow efficiently, how do you expect your clients to stay on top of theirs? 

With an all-in-one business management software, such as Houzz Pro, you can keep your finances organized from anywhere, whether you're on site or meeting suppliers, allowing you to track income, costs, and any unpaid invoices. 

Do get your invoicing organized 

As well as making it super-easy and convenient for clients to pay you, consider making the invoicing process even quicker and efficient at your end too, with the help of a digital invoice tool. With invoicing software, such as Houzz Pro, you can send professional branded invoices straight to your clients devices. These clear-to-navigate invoices allow clients to easily click on a button and pay instantly, saving both parties time and hassle. 

Being able to invoice immediately through an efficient online system, speeds up the payment process and ensures your cash flow flourishes. Managing your own payment schedule and invoices also allows you to adopt payment incentives, such as a 3% discount to clients who settle up before a payment is due, as well as late payment fees. This puts you fully in control of your finances and your business. 

Don’t invoice incorrectly 

Not only does an incorrect invoice to a client make you look unprofessional and incompetent, it can also delay payment and your project, so it’s vital to invoice correctly every time. 

By having business management software in place that can track orders, stay in touch with clients and your team, manage every moving piece of your project, and generate accurate invoices, you’ll be sure your clients are being sent the correct information every time. 

Do invest in a communication portal 

Make communication with your clients, your team and subcontractors transparent with an easy-to-use online portal that gives everyone access to all the communication history and project details. 

With Houzz Pro’s client dashboard, you’ll not only be able to share project plans, mood boards and design tools with clients, they’ll also have complete financial visibility of the project, allowing them to see costs and take immediate action on outstanding invoices and approvals to keep the project moving forward. 

Don’t miss paying suppliers

The construction company is an interconnected industry, where everyone relies on other parties to supply their materials, services or payments on time to avoid financial distress or delays. 

If a subcontractor is slow in billing you for their materials or services, don’t put off paying them as this could result in you having to fulfill many payments all in one go, disrupting your cash flow. Suppliers could also take you to court for late payments, and no business company wants to spend time and money arguing that out. 

Houzz Pro’s financial reports can help you keep tabs on your payments and give you a detailed summary of all your project transactions. By having a healthy accounting system that manages your payment collections from clients, and payments to suppliers, you will do your part in maintaining the supply chain and contribute to the overall success of the construction industry.

It’s worth remembering that life happens, and many factors can affect a construction project, so being able to flex when challenges arise will improve client satisfaction, as well as word-of-mouth referrals. 

We hope these payment strategies help you to manage your business and build client relationships, but most of all, make it easier to continue doing the job you’re passionate about.

Give Houzz Pro a go with a free trial. 

The information contained in this article should not be relied upon as legal, business, or tax advice. We encourage you to seek guidance from your legal counsel, business or tax specialist with regard to how the information contained in this article may or may not apply specifically to your business.