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Five mistakes that contribute to poor A/E firm cash flow
Posted by Scott Melnick on October 11, 2007 at 10:54 AM.

According to ZweigWhite Research: “Most of the time firms cause or contribute to their cash flow problems. And more often than not, it’s the same problems that bring about poor cash flow again and again.” ZweigWhite (along with their competitor FMI) is a big management consulting firm specializing in the construction industry. They offer a long list of publications as well, with their latest being “A/E Financial Fitness Plan.”

 

Among the top mistakes pointed out in the book are:

 

  1. Opening projects without contracts in place. Without a contract, your firm will have no leg to stand on if there is any kind of dispute.
  2. Relying on project managers to schedule billing. Don’t rely on your project managers to tell the accounting department when an invoice should be sent.
  3. Poorly designed or confusing invoices. Make sure your invoices clearly state total amounts due (current and past) as well as terms and deadlines for payment.
  4. Relying on project managers to manage the collection process. Don’t rely on your already-busy project managers to monitor collection procedures. They don’t like doing it, and who can blame them?
  5. Not having a defined collection policy. A collection policy is a specific set of steps that you take to collect an invoice. Make sure that it’s simple, systematic, and consistently followed.

 

For more information, visit ZweigWhite.


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