The construction industry is one of the most challenging sectors when it comes to cash flow management. Projects are lengthy, material costs are substantial, and payment terms are often stretched. According to the Confederation of Finnish Construction Industries RT, average payment delays in the sector are 52 days.
Cash Flow Challenges in Construction
Typical challenges:
- Long projects tie up capital for months
- Materials must be paid for before revenue comes in
- Clients often pay on 45–60 day terms
- Seasonal fluctuations affect workloads
Solutions for Improving Cash Flow
Invoice financing is a particularly useful tool in the construction industry. It allows you to finance even large project invoices and access funds immediately for project progression.
Construction companies can improve their cash flow by up to 40% through invoice financing.
Planning Milestone Payments
Agree on milestone payments based on project progress. A typical split could be 30% at start, 30% at midpoint, 30% at completion, and 10% during the warranty period. This significantly reduces cash flow risk.
