Managing cash flow as a contractor

On Behalf of | Nov 30, 2018 | Construction Law |

Contractors in Florida may find that they have problems managing cash flow as the construction sector has recently seen significant growth. Typically, a subcontractor will bill the general contractor once a month. Once the general contractor receives bills from the subcontractors, a single invoice is sent to the owner of the property. From there, it could take up to 60 days for the owner to make a payment.

This lack of timely payment may result in squabbling between the different parties involved with a project. Cash flow issues can be especially prevalent in situations when companies take on additional projects since they usually must fund operations on their own up front. Contractors generally have to finance operations because of the way the construction industry changed during the financial crisis. Prior to that time, contractors would generally get money to pay for materials before the job started.

If a government contract is involved, there could be even longer delays in getting paid. When payment arrives depend on when inspections can take place, and it may also depend on if there is money available in the budget to pay contractors. To protect themselves, contractors are encouraged to be upfront with suppliers in an effort to work out better payment terms. They should also consider getting a line of credit to ease their cash flow concerns.

Typically, there are multiple parties interested in the outcome of a construction project. This means that a dispute may occur at some point. If a problem arises during a project, it may be worthwhile to hire someone who understands construction law. Legal counsel could potentially resolve the matter in a timely and affordable manner. In some cases, a matter may be resolved by rewriting or clarifying an existing agreement.