Construction companies often see business cash flow trapped in several areas:
Billing discrepancies. Ensure that the project teams capture and provide accurate information to help finance teams bill timely and to identify out of scope work.
Unprocessed change orders. In most cases, costs related to unprocessed change orders can’t be billed until all parties sign change orders. Helping project teams manage and resolve unprocessed change orders in a proactive and efficient manner can help expedite the company’s change requests and its ability to bill and collect for those items.
Claims. Similar to unprocessed change orders, proactively managing and settling claims early can help improve cash flow and avoid the costs associated with a long, drawn-out negotiation.
Accounts receivable. Overlooking timely collection hurts liquidity.
Retentions. Companies sometimes forget to bill for retention. Provide billing notices to bill and recoup retention amounts as soon as eligible.
Inventory and other assets. Supply chain volatility can lead to inventory arriving before it can be installed, driving up storage costs. Additionally, certain inventory may require down payments ahead of arrival or installation; try to map your contract schedule in a way that permits advanced billing.
Accelerated debt amortization. Repaying debt sooner than contractually obligated could result in an unnecessary decrease in cash that may be more important that the reduced interest cost.