We’re about to start a whole new year! It’s a perfect time for evaluating your current processes to establish what’s working and what you can improve on. If you’re like many construction companies, your business payments could use some brushing up.
It can take months for a construction business to get paid. Payment delays aren’t just frustrating; they can cause cash flow problems, delay projects, and detract from essential business relationships.
Let’s start the year off right. Here we’ll discuss some things you can resolve to move money into and out of your contracting business faster.
1. Fix your contracted payment schedule
You can’t always control when you get paid for your work. However, you can resolve to create contracts that work best for your business. Protect your cash flow by signing contracts that require you to pay and get paid at the best possible times during the job. Include milestone payments at intervals that will facilitate cash flow to allow for the project’s continuation.
If your projects include time-based payments, make them work strategically for your accounting patterns. Create a schedule based on maintaining enough residual cash in your account to pay for supplies, labor, and unexpected costs.
Create payment schedules for your workforce, subcontractors, and suppliers that coincide with payment due dates from your clients to balance your accounts throughout the project’s lifecycle.
2. Send preliminary notices
Make a resolution to communicate better, including sending preliminary notices when you start work on a project. Clearer wording in construction documents and more explicit expectations between project stakeholders will help avoid many problems in your projects.
A preliminary notice, also called a notice to owner or notice of furnishing, notifies an owner or general contractor of work a contractor is doing on a project and any payment due dates that apply.
While some subcontractors find sending preliminary notices a touch of overkill, they open clear lines of communication and clear up confusion about the status of the work, and could facilitate faster payment.
3. Make proper use of lien waivers
Construction liens and lien waivers are important tools within the construction payments landscape. Construction liens are legal claims for payment on services or products a contractor has used to improve a property on behalf of an owner. Liens get registered to real estate titles on the property and can impact the property owner in the future, which makes them effective tools for contractors to ensure prompt payment.
A lien waiver is a document a contractor signs after being paid that relinquishes the ability to file a lien on the property for that payment. Owners may require a completed lien waiver before issuing payment to a contractor, and obtaining this paperwork may involve a lot of time-consuming back-and-forths. Send an appropriate lien waiver, often a conditional lien waiver, with the invoice to expedite the payment and paperwork process.
4. Invoice quickly
This year, make a resolution to send your invoices promptly. You can’t blame an owner or general contractor for slow payment if they haven’t received complete and detailed invoices promptly after you’ve completed your work.
Make sure your invoices include
- Your business name
- An invoice number
- An invoice date and payment due date
- The client’s name
- A detailed rundown of the products or services you’ve provided
- Information on how to make payment
Using an invoice template will make it easier for clients to find all the information they need to pay you fast.
Likewise, when you receive an invoice, schedule payment as quickly as it makes sense for your cash flow so you can clear your own debts on time.
5. Follow up on your invoices
Keep an eye on your unpaid invoices and follow up with reminders to jog clients into paying faster. Use the payment due date on the invoice as your guide, and follow up on that date, as well as two weeks, one month, and two months following the payment due date.
Not every company has a robust accounts receivable department, but using automated payment reminder systems can help schedule reminders and improve your odds of receiving payment quickly.
6. Make it easy to pay
Finally, whether you’re paying or being paid, resolve to make payment super simple. With Truss, you can insert payment links directly onto your digital invoices so that clients can pay with a few clicks. Once they do, the funds are available to you instantly, so you can use them to keep your projects moving.
Import payable invoices directly from your inbox into Truss to make payments a breeze. As soon as you make a payment, your vendors can access the funds through their card or by ACH.
Pay and get paid faster
Start fresh in the new year with a resolution to move payments through your construction business faster. As with all resolutions, success depends on creating actionable goals to back them up. In 2023, create healthy payment habits with clear communication, automated assistance, and easy bill payment.
Ready to make bills a breeze? Contact Truss for a demo now!