There is a famous quote that says: "A business can go broke while making a profit." If this were to happen to your business, it would indicate poor cash-flows. Cash-flow is vital to every business as it reflects your ability to pay day-to-day expenses so without strong cash-flows, you could find yourself in a bit of trouble. One of the largest obstacles to solid cash-flow is bad debt, as reflected in your accounts receivable. The longer a client lingers in accounts receivable, the more likely they are to turn into bad debt and this has a massive effect on your liquidity. A build-up of these bad debts could lead to the demise of your business. This is why it is important to keep on top of your debtors before it is too late.
The construction industry is currently going through a volatile phase. There have been numerous builders going into administration in the last few months and this has left a lot of subcontractors out of pocket. We have noticed that a lot of our subcontractors have had large exposures to builders and this can be detrimental to small business. We have a few recommendations for how to approach larger contracts: