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Optimizing Credit Policy for Contractors' A/R Management

Meet John, a construction business owner who has been in the industry for over a decade. John takes pride in delivering quality projects on time and within budget. However, he often finds himself struggling with his cash flow, despite having multiple projects going on at once. Late payments, unpaid invoices, and bad debts are some of the issues that keep him up at night.

John knows that managing cash flow is crucial in the construction industry. Having cash on hand is essential to pay suppliers, subcontractors, and employees, and to invest in new projects. But managing cash flow is easier said than done, especially regarding credit and accounts receivable management.

John has taken some measures to improve his credit policy and accounts receivable management, but he still faces challenges. For example, he finds it hard to determine which clients are creditworthy, how much credit to extend, and how to enforce his credit policy. John also struggles with timely invoicing and collection, which affects his cash flow.

John's situation is not unique. Many construction business owners face similar challenges when it comes to managing their cash flow. That's why having solid procedures in place for credit policy and accounts receivable management is essential.

define credit

This blog post will explore how a company's credit policy and accounts receivable management are connected.

We'll also dive into the basics of credit policies and how you can create ones that work best for your business. Get ready to take control of your cash flow and keep your construction projects on track!

Table of Content:

The Relationship Between Credit Policy and AR Management

Is your construction business struggling to manage its cash flow? Did you know that having a solid credit policy and accounts receivable (AR) management process can help? Let's explore how these two aspects are connected:

What Is A Credit Policy?