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Collect Your Money When It’s Due
Maintaining healthy levels of cash is key to the viability of any contractor. This is especially true during these times of material shortages and long-lead deliveries resulting from supply chain problems.
Many large companies are being negatively affected due to supply chain delays and the construction industry is no exception. For roofing materials specifically, certain material lead times are currently six, seven and eight months.
In such an environment, it is vital to take steps to conserve cash. Cutting non-vital expenditures is one important step. However, being persistent and diligent in collecting money due to your firm is more critical than ever. We are paying labor and material costs weekly, so collecting cash on every account within 30 days, or sooner, is of utmost importance. And whatever you do, be sure to work deliberately to keep accounts from extending payments out 45 days or longer.
To increase the likelihood of keeping clean Accounts Receivables, try to work with customers that are financially strong and able to meet their financial responsibilities and consider offering discounts of 1%, 2% or 3% as an incentive for early payment—10 or 15 days from the invoice date.
Remember, Cash is King!