Januar
y 29, 2018
A lot has been written on the ongoing recovery of the construction industry. Although most experts predict that 2018 will be another good year, some caution that contractors are still facing residual challenges, such as with cash flow.
In her article entitled: “
A Downside for Contractors in the Building Boom
”, published in Forbes on December 10, 2017, Mary Ellen Biery cites construction industry data from Sageworks that found that privately held companies in several construction sectors are waiting longer, on average, to receive payments from customers. On the flip side, these same companies are paying their own bills, on average, more quickly than they were a few years ago.
Biery offers insights from accountants, including Marty McCarthy, on why. Marty suggests that the recession has had a lasting impact on contractor payment cycles. For example, before the recession, contractors could get part of the contract amount paid in advance to cover “mobilization,” or purchasing the materials needed for the job. As contractors went out of business during the recession, creditors had to recoup their losses on raw materials paid for upfront. Creditors are not as willing to finance raw materials today, forcing contractors to pay for building materials before receiving money from their customer.
The article explains other reasons for cash flow challenges, as well as suggestions on what contractors can do. Click
here
to read the article.
As always, feel free to contact us at 610.828.1900 to discuss your cash flow issues or email me at
[email protected]
. We are always happy to help.
