In the construction industry, payment security is an ongoing issue. With almost 60% of the sector self-employed, and 39% with less than 20 employees, it’s an area where many construction companies are vulnerable, and the stakes can be high. For small businesses or self-employed sub-contractors, payment security can have a significant impact on not just the future of the company but the livelihoods of the individuals involved. In this environment, cash flow management is king. Here are some tips to better manage yours.
#1 Get your systems and processes in order
We all know that administration can be a headache, particularly in the construction industry, where you want to be out there on the tools earning but having the right systems will save you time in the long run. It’s essential to know exactly where you stand and have good oversight of your incomings and outgoings so you can plan for a healthy cash flow.
#2 Offer your clients payment options
The very nature of the construction industry means it is vulnerable to late payments. Many jobs are done in a hierarchical structure, where the building contractor takes payment directly from the client, then pays suppliers down the chain. This structure leaves it open to a domino effect, where one late payment has flow-on implications for other businesses.
One strategy to help your clients pay you on time is to offer them the opportunity to use your services today and pay later when they receive their payment. Selectpay’s business-to-business Buy Now, Pay Later solution does exactly this, managing cash flow on both sides of the equation. You get paid upfront, and your client pays over monthly instalments for a low, transparent fee. It doesn’t cost you anything or take any resources from your business, making it a perfect solution for the construction industry.
#3 Spread out your own costs
Managing expenses can be difficult in a high-cost environment, with the cost of trade supplies and equipment quickly racking up. And these expenses are often incurred well before you can expect payment for the job. Using a buy now, pay later solution designed for your industry to pay your own invoices helps you regulate cash flow, paying for supplies and equipment over time. This will help you better forecast and cover expenses to align with incoming payments.
#4 Consider invoice financing options
Another option to consider is invoice financing, whereby you receive a percentage of your invoice upfront, and the client still pays to your standard terms. There is no difference for your clients, but you’ll have access to the cash faster so you can prepare for the next job without sweating on payment for the last.
#5 Manage your staffing needs
Staffing is a significant cost for construction businesses, and needs can be variable. It can help to work with a recruitment partner who can help you plan your workforce needs across permanent and temp roles and find the right people for your business.
If you are interested in getting paid faster and better managing cash flow in the construction industry, get in touch. The Selectpay team can help you find a customised solution that is hassle-free and keeps your business moving.