Optimizing Working Capital in Construction: What Strategies Work?
From negotiating better rates to extending payment terms, three industry leaders share their firsthand experiences in optimizing working capital. We’ve gathered insights to reveal how strategic financial management can lead to greater stability in the construction sector. Discover how these top executives have transformed their companies’ financial health.
- Negotiated Rates for Financial Recovery
- Blockchain Enhances Payment Efficiency
- Extended Payment Terms Free Capital
Negotiated Rates for Financial Recovery
You scratch my back, I’ll scratch yours.
As you’ve probably heard, construction material prices have shot up through the roof during the pandemic, and that was a huge hit for us, because we either had to swallow that price difference or we had to pass it onto the client. But that means we’re running the risk of losing the client. Not to mention that some of these projects were started with the promise of a certain budget, how can I turn around and tell them it will cost them double?
It turned us a little upside down for a while there, not going to lie to you. But fortunately we were able to talk to the suppliers and vendors directly and negotiate some special rates. That’s the advantage of being in the game for years and years, you establish those valuable relationships and everyone is interested in maintaining them. We scratch their backs when needed, they scratch ours. We realigned our incomings and outgoings and got back to a healthy stable situation.
Blockchain Enhances Payment Efficiency
We adopted blockchain technology to streamline payment tracking and optimize working capital. The transparency and efficiency of blockchain allowed us to monitor payment status in real-time, reducing payment delays and disputes. This not only improved our cash flow but also enhanced financial stability by eliminating uncertainties in payment processes.
Gil Clark Jr., CEO, GH Clark
Extended Payment Terms Free Capital
One specific example of how our construction company optimized its working capital and improved financial stability was by renegotiating payment terms with our suppliers. By extending our payment terms from 30 to 60 days, we were able to better align our cash outflows with project milestones and client payments, effectively freeing up more working capital for day-to-day operations and strategic investments.
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