John Hanson says he doesn't necessarily ascribe Hanson General Contracting's recent cash flow problems to an economic slowdown, but it's a decent bet that the two are related. Lately, he says, the Philadelphia company has experienced a longer turnaround time on its accounts receivable. While the company asks for payment within seven days, in a few instances it's been waiting more than 30 days for payments on large jobs.
This causes obvious problems for Hanson, who has trade contractors and other vendors asking for checks. To deal with this problem without having to dip into his company's line of credit, he attacks it at both ends.
First, Hanson explains to clients that “to provide you with the best service and value, we need to pay our subs quickly so they'll want to continue to work on your job.” At the same time, he's talking to those subs. “We try to sit at both sides of the table whenever we have to manage our cash flow,” Hanson says. By explaining the situation small-business owner to small-business owner, he can usually gain forbearance from them. But if he has the cash in his account, he'll settle up with the sub even if the client has yet to pay for that job.