How Understanding Cash Flow Can Help Your Business Succeed

In construction, strong contracts and profit margins often appear to be signs of financial success, but that’s not always the case. According to For Construction Pros, many companies report healthy profits yet struggle to pay suppliers, subcontractors, and employees on time.

The issue often stems from a disconnect between contract payment terms (or draws) and real-world expenses. When projects require significant upfront spending on labor and equipment, but client payments are delayed for multiple weeks, businesses are forced to cover large expenses long before any cash arrives. In some cases, projects don’t become cash-flow positive until months into the work, and that strain only grows as more contracts are added.

However, there are several strategies companies can use to ensure they’re cash-flow positive from the jump, such as asking for upfront deposits, negotiating front-loaded payment terms, and ensuring clients are educated on their payment terms, among other tactics.

In business, cash is king. Growth should never come at the expense of sustainability. Just because a contract is profitable, doesn’t mean it will provide positive results. While profitability is a key performance indicator, cash flow is the lifeblood of your business. Growth requires cash. Don’t let your growth be what takes you down. Before you sign your next contract, negotiate terms that will ensure both profitability and positive cash impact.