We all know the phrase, “Cash is King.” You can’t run your construction business without access to cash. It’s essential to meet your needs and to grow your business. To boost your business’ cash flow and keep a strong pulse on your business, we share four financial traps to avoid.
4. Buying new equipment
As a growing construction company, you need to invest in new equipment. The question is whether you will buy the equipment outright or lease it. From a cash management perspective, leasing equipment is the smarter move. By leasing vehicles, computers and other business equipment, you avoid tying up cash. In addition to having more cash on hand for other key areas of your business, you still get to expense the lease costs on your business taxes.
3. Sending invoices by mail
With today’s speed of business, there is no reason to only mail invoices to customers via the postal service. As soon as the work is completed, email invoices. Ensure your invoices are straightforward and easy to read, with key sections like due date, amount due, where to send payment and payment methods clearly highlighted. Any delays with invoicing will hamper your cash flow.
2. Not utilizing electronic payments
Waiting for checks to come in the mail will also hinder your cash flow. Receive funds through ACH or wire to immediately increase cash on hand. In addition, electronic payments are much more secure than paper checks. For one, electronic payments can’t be lost in the mail, and they cut out all intermediaries and reduce the risk of fraud and tampering.
1. Letting outstanding sales stack up
The number one cash flow issue in your construction business is letting outstanding invoices stack up. It takes between 60 and 90 days for most invoices to be paid. Not many businesses can afford to sit on invoices for 3 months as expenses continue forward.
Factoring your invoices is the smart financing option to help you manage this extended invoice cycle. Factoring enables you to turn your invoices into working capital immediately. Instead of waiting for the invoices to stack up, you are able to get a cash advance on the unpaid invoice immediately. The best part - you are not incurring any debt. These are funds you have already earned.
BAM can turn your invoices into cash
At the end of the day, managing cash flow is the critical factor in building your business. BAM has been helping businesses free up their cash flow with invoice processing. One-click funding and approvals in under 24 hours gives our customers immediate access to working capital. Call us today to learn how we can help you.