One of the challenges of working as a roofing contractor is that most clients pay you 30 to 60 days after you raise an invoice or progress claim. End employers and principal contractors often demand net-30 payment terms as a condition of working with them. However, this demand affects your cash flow and could affect your ability to pay roofing-material suppliers, employee wages, and other expenses.
Can you offer early payment discounts?
One simple option your roofing company can use to improve its working capital is to offer clients a discount for early payment. Discounts are simple to implement and can be very effective.
Basically, you offer your client a discount, such as 2%, if they pay an invoice within ten days. Many clients, especially those who are well financed, take this discount since it improves their profits. Many contractors can get good results implementing this simple plan.
Early payment discounts have some problems, though. Payments are voluntary and optional. Your client can choose to pay early and take the discount – or not. This variability adds a level of uncertainty to your working capital. While it may improve things, the improvement is often not enough. For many roofing contractors, using progress claim financing is a better option.
Progress claim financing improves cash flow
Progress claim financing is a type of debtor finance that specialises in the construction industry. You can use it to finance your claims so you get immediate funds, instead of waiting weeks for your payment. It is relatively easy to use and works well with most roofing contractors.
The programme finances your claims in two payments. The first payment is deposited to your bank account soon after you raise the invoice and send a copy to the debtor finance company. Usually, the first payment covers about 70% of the total value of the invoice.
The second payment is deposited to your bank account once your end customer pays the invoice in full, on their regular schedule. The second payment covers the 30% that was not initially advanced, less the finance fees.
Better than an overdraft
For most roofing companies, using a progress claim financing facility is better than using a commercial business overdraft. The most important advantage is that the line is flexible and adapts to your sales growth. The line can usually be increased as long as you are working with end employers and principal contractors who have good commercial credit.
The claim financing facility does not require real estate security, which makes progress claim financing more accessible than overdrafts. Lastly, most lines can be put in place quickly.
Can this programme help your roofing company?
This type of financing can be used by roofing companies that:
- Work with reputable commercial clients (e.g., head contractors, etc.)
- Operate under the Security of Payment Act (SOP)
- Have good invoicing policies
- Meet the underwriting criteria
Benefits for roofing contractors
The main advantage that your company gets from using this programme is improved cash flow. But there is another – almost equally important – benefit: the debtor financing company can help you evaluate the creditworthiness of your commercial clients before you work with them. This guidance helps decrease collections problems and, ultimately, bad debt.
Need progress claim financing?
We are a leading debtor finance company and can provide you with a competitive progress claim financing proposal. For information, use the enquiry form.