Construction Law

Preventing Cash Flow Issues featured image

Preventing Cash Flow Issues

One of the greatest challenges in the construction industry is managing your finances to keep your current projects rolling smoothly while you invest in the next job. Whether you’re a contractor or a subcontractor, managing your cash flow is a daily challenge that requires you to stay on top of numerous financial obligations including payroll, taxes, material suppliers, and more. When your well starts to dry up at inopportune times, it can lead to disputes with owners or workers and threaten to derail your project. Don’t let this happen. Consult a construction lawyer in Clarksville, TN, to help you settle disputes quickly so you can focus on preventing future cash flow issues.

Out of Cash, Out of Time

Contractors can go out of business for a variety of reasons. While poor workmanship and the inability to meet the terms of a contract can reduce a firm’s profitability, cash flow issues are the main reason why contractors are forced to hang up their hard hats for good. Cash flow issues not only impede your firm’s internal operations, they also create tension between the contractor and owner. It can also lead to distrust among your subcontractors and materials suppliers. Sometimes, contractors make the mistake of withholding payment to payoff a past project in hopes that they can “make it up” later, but this typically only serves to exacerbate the issue.

Common Causes

While some contractors’ cash flow issues are self-imposed, more often than not, these issues stem from external factors that aren’t always under your control. Contractors who need assistance with staying on top of their finances can benefit from a partnership with a construction lawyer in Clarksville, TN, who can help them get paid when owners refuse. We can also review your contracts to warn you about potential contractual provisions that could affect your cash flow. Some common causes of cash flow issues include:

  • Late payments from owners.
  • Cash tied up in active projects.
  • Contractors or subcontractors submitting insufficient invoices to workers.
  • Paying for and completing alterations without submitting a change order and getting approval from the owner.
  • Unfamiliar billing practices result in missed deadlines or billing issues.
  • Unanticipated cost increases related to payroll taxes, union dues, insurance fees, or other financial commitments.

Improving Back-Office Infrastructure

While larger companies typically have the cash flow necessary to sustain operations when financial issues arise, smaller companies often focus so intently on boosting their reputation by providing quality work that they fail to invest in the back-office infrastructure needed to keep payments flowing in on-time. Your firm needs to send out bills frequently and process payments as soon as they arrive to keep the gears of your firm turning unimpeded. Hiring an accountant or office manager is one way to improve your back-office infrastructure. Additionally, for a fee, you can keep a construction attorney in Clarksville, TN, on retainer to ensure that legal issues aren’t slowing you down.

If you would like to speak with a construction law attorney in Clarksville, TN, please contact us today.


Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.