Steady, reliable cash flow is crucial for the survival of your construction business – so taking steps to ensure your customers pay promptly is a key priority.
Debtor days refers to the length of time it takes clients, on average, to pay you for the work you’ve done. A higher number of debtor days means clients are taking longer to pay you. A lower number of debtor days means clients take less time to pay you, which means there’s more cash available for your business to use.
In the construction industry, debtor days can average as long as almost three months. Shortening that length can have a huge impact on your cash flow.
When your clients consistently pay on time, you’ll avoid the dreaded “feast or famine” cycle. You’ll be able to pay your vendors, suppliers, and employees on time, and, not least of all, yourself. Additionally, if clients start taking too long to pay you, you may leave money on the table in exchange for collecting anything at all.