Operating a successful construction business comes with many different challenges. Some of which consists of producing the highest quality jobs possible by a specific deadline. Other challenges normally involve the company’s administrators securing the payments earned from the projects that they complete as quickly and efficiently as possible. In fact, these processes are essential to the effective operation of the entire business, especially because they assist with maintaining a positive cash flow and ensures the construction business earns a profit. To that end, here are 5 great tips that can be used to ensure your construction business is paid on time.
Tip #1: Establish Clear Payment Terms in the Client’s Contracts
Part of a construction company’s regular business activities is getting the client to agree to sign a contract before the job begins. It’s during these times that everything should be clearly laid out and defined, from the start of the construction project to its completion. To make sure each client has a clear understanding of what is expected of them when their payments begin, the payment information should be explained in details in the contract. For instance, the client should know the payment due date, the amount due, where to submit the payment and any other accounting information that’s related to paying the construction company on time.
Tip #2: Send Construction Accounting Invoices in a Timely Manner
Another key to making sure clients pay their accounts on time is sending out their construction accounting invoices in a timely manner. Even though a construction company’s billing department can easily get behind when they are swamped, this is not an area that should go lacking. To avoid these problems, both small and large companies can benefit greatly from implementing an automated solution. Fortunately, there are many construction software solutions available that can assist with various kinds of invoicing problems. These accounting management software systems can help with making sure the billing for each client goes out on time each month, while also providing timely reminders to let the client know when their bill is due in advance.
Tip #3: Offer Early Payment Incentives to Encourage Clients to Pay on Time
In addition to making sure clients receive their invoices on time, the construction business may also want to offer various incentives for making payments on or before the due date. To ensure a client pays promptly, some construction companies will offer a discount. For instance, the construction company may offer a 5% or 10% discount for paying their accounts before the due date arrives. When making these types of offers, it is also important for the added incentives to be clearly noted on the invoices so that they are not easily overlooked.
Tip #4: Make the Payment Process Easy to Follow
Today, individuals and businesses alike have many different ways to pay their bills. Even though some businesses may still pay all of their bills by mail, others are taking advantage of various kinds of electronic payment processing methods. Regardless of the form of payment that the client chooses, the construction company should make sure that they are accommodating a variety of different needs. In specific, if the client wants to send an electronic payment via the company’s credit card, this is an excellent payment method, especially since it expedites the receipt of the client’s payment. Also, in the event that the client may be running late with their payments, they can make the deadline by sending the payment electronically instead of by mail.
Tip #5: Lines of Communication Should Be Open and Positive for Present and Future Relationships
One of the main goals of any construction business is to have their clients pay before or at least by the due date. However, it is important to note that emergency situations will occur from time to time. How these situations are handled can make a major difference in the future of that client and the construction company’s relationship with that client as well. Therefore, these accounts must be handled with care and a friendly reminder with communications being kept open is one of the best ways to handle these situations. For instance, the administrator for the account can let the client know what their late payment options are based on the company’s policies and procedures.