Don’t be the bank: Why you should bill early and bill often

Story time: A seasoned home builder – let’s call him John – always prided himself on delivering high-quality projects on time. However, his success began to unravel when he took on a larger, more complex job.

Despite in-depth planning, John encountered significant cash flow issues due to delayed client payments. As bills for materials and subs began to pile up, he found himself dipping into his personal savings – and even taking out loans to keep the project afloat.

The stress was crushing him, affecting not only his business but his personal life, too.

It wasn’t until John revamped his strategy, adopting an early and frequent invoicing system, that he was able to stabilize his cash flow, regain control of his finances and restore his business’ health.

This process change led to the aha moment John needed to understand the importance of proactive cash flow management.

Whether or not you’ve felt the weight of John’s predicament, invoicing early and often can significantly improve the financial health and operational efficiency of your construction business.

Let’s dive into why you shouldn’t be acting as the bank for your homeowners – and practical tips on how to change your invoicing system so its works for your team today.

The importance of cash flow in construction

Cash flow, the movement of money in and out of a business, is the lifeblood of your construction company. It determines your ability to cover expenses, pay employees and subcontractors, as well as invest in new projects.

In construction, where projects often span months or even years, maintaining a healthy cash flow is crucial. This steady stream of income ensures your business can keep up with the demands of ongoing jobs, especially in a rocky economy. Without it, even the most profitable projects can grind to a halt due to a lack of available funds.

Delayed payments from clients are a common issue for home builders and are often caused by lengthy approval processes or disputes over completed work. High upfront costs for materials and labor – along with the need to wait for project milestones to be reached before invoicing – can strain your financial resources. Plus, slower seasons can lead to periods of low income, making it difficult to maintain a consistent cash flow. These challenges require careful planning and proactive management to ensure your business remains healthy and operational.

Poor cash flow management can have devastating effects on your construction business, including project delays, frustrated clients, loss of future business opportunities and strained relationships with subs and suppliers. In the worst-case scenario, persistent cash flow problems can force you to close your doors – despite having a full pipeline of projects.

But there’s an easy way to prevent these issues from occurring: invoicing early, and invoicing often.

The benefits of invoicing early and often

Charging your homeowners earlier in their project, as well as throughout the duration of the job, can lead to the following benefits for your business:

Improved cash flow

Ensure a steady inflow of funds so your business can cover ongoing expenses and invest in new projects.

Reduced financial stress

Minimize the need for loans or credit, lowering financial stress and interest expenses.

Enhanced project management

Provide more accurate tracking of project progress and budget, facilitating better decision-making.

Stronger supplier relationships

Timely payments to suppliers and subcontractors foster trust and potentially securing better terms and prices.

Early issue detection

Regular invoicing helps identify discrepancies or issues early on, allowing for quick fixes before they escalate.

Consistent revenue stream

Create a predictable income to simplify financial planning and ensure your business can meet its obligations consistently.

6 tips for changing your invoicing process

The thought of changing yet another business process can feel daunting. But trust us, this one’s worth it. That’s why we’ve put together six practical ways for you to start invoicing your clients early and often:

1. Set clear schedules: Establish a regular invoicing cycle, such as weekly or bi-weekly, and communicate this schedule to your clients from the start. Clearly outline payment terms and deadlines in your contracts to ensure that all parties are on the same page.

2. Use technology: Invest in construction management software, like Buildertrend, that includes automated invoicing features. These tools can streamline the invoicing process, reduce administrative workload and ensure invoices are sent out quickly and accurately.

3. Communicate with clients: Maintain open and transparent communication with your clients about your invoicing practices. Explain the benefits of frequent billing, such as better cash flow management and more efficient project tracking, to help them understand and accept the process.

4. Monitor and adjust: Regularly review your invoicing practices and be prepared to make adjustments as needed. Track the effectiveness of your billing schedule, gather feedback from clients and refine your approach to ensure it meets both your business needs and your clients’ expectations.

Overcoming common invoicing objections

Your clients might not be thrilled to hear they’ll be charged early and often for their project. But don’t let that fear stop you.

This process change just requires clear communication and a strong focus on the benefits to your client.

Start by explaining how regular billing helps maintain project momentum, ensuring timely payments to suppliers and subs, which in turn keeps the project on schedule. A win for the eager homeowner!

Highlight that early and frequent invoicing allows for more accurate tracking of project costs, reducing the likelihood of unexpected expenses or budget overruns. Another bonus.

Reassure them this practice fosters transparency and accountability, providing them with regular updates on project progress and financial status. It’s no secret homeowners crave transparency.

By demonstrating how these invoicing practices ultimately protect the client’s interests and contribute to the successful and timely completion of the project, you can help alleviate concerns and gain their support. It’s a win-win all around.

How one builder improved cash flow and impressed his clients

You may be thinking, ‘This concept is all well and good – but where’s the proof this works?’

The proof is in Krueger Brothers Construction when they switched to online payments with Buildertrend.

Using Buildertrend Payments allowed this contracting team to invoice their clients frequently and efficiently throughout their project.

“The client didn’t want to use a credit card, so instead of mailing a check, they were able to log in to the Customer Portal and make a payment through the ACH feature,” Michael said. “And it was a fast process. I remember that because it was a lifesaver allowing them to pay their invoice quickly.”

Read the full case study to learn more.

Say goodbye to financial stress

Invoicing early and often offers numerous benefits, including improved cash flow, reduced financial stress, enhanced project management and stronger supplier relationships.

Proactive billing practices are essential for maintaining the financial health and operational efficiency of your construction business. By adopting these strategies, you can ensure smoother project execution and greater client satisfaction.

Take a closer look at your current invoicing practices and consider how they can be improved. Schedule a demo with Buildertrend today to see how our platform can streamline your processes and support your business growth.