In most industries, paying vendors on time isn’t the highest priority. Whether it’s slow processes, lack of automation or poor cash flow management, there always seems to be an excuse for late payments.
According to an article by online publication, Supply Chain Dive, 47% of companies surveyed confess that one in 10 payments go out late, 16% admit that one fifth of their payments are never on time and only 5% of businesses can assert they always pay on time.
The reality is ensuring on-time payments for vendors, especially in the construction industry, should be a top priority. With today’s market of skyrocketing prices and substantial supply chain delays, you should be doing everything you can to maintain partnerships with your preferred vendors.
Here are three reasons why prioritizing on-time payments is so important.
1. Prevent poor cash flow for everyone
To run a successful construction business, you need a properly managed cash flow. Without it, you’ll get nowhere. The same goes for your vendors. If they don’t have payments coming in on time from builders, they don’t have anything to work with when purchasing products and materials.
Adding automation to your financial systems and not chasing invoices will save everyone time. By streamlining your processes for cash flow management, you’ll ensure you’re always prepared financially to pay your vendors on time. Consistent cash flow is essential for all parties involved and will make it easier to foster those important connections.
2. Strengthen relationships with your vendors
Prioritizing on-time payments to your vendors will not only help you build trust but will also increase their confidence in you as a business partner. Developing these types of loyal working relationships is essential in a competitive construction industry.
Whether it’s a vendor you know or someone new, you should agree on terms of payment from the start. Be sure to monitor your payment system and know if it’s flexible enough to meet the determined payment terms. These kinds of agreements combined with your commitment to paying on time will strengthen your vendor relationships and ensure they want to continue working with you.
3. Become a builder of choice
We’ll say it one more time – vendors want to work with builders who pay on time. And having dedicated vendors during a time when there’s a serious labor shortage is huge. Builders who pay on time allow their vendors to prepare and have the materials you need in stock. It makes their lives easier and yours too as you try to keep projects on schedule. Plus, you’ll avoid any fees or late payment interest charges.
On-time payments signal that your construction business is financially stable, which makes vendors more willing to select you as a builder of choice. Being a builder of choice offers perks like taking priority over other contractors and having the opportunity to negotiate better deals. Lower costs for you means lower costs for homeowners. Everybody wins.
Do you pay your vendors on time? Become a builder of choice with CBUSA
As a member of CBUSA, you’ll have access to our network of preferred local vendors who love working with builders that pay on time. You’ll also enjoy other perks like:
- Optimized material planning and purchasing
- The best deals on the best brands
- Valuable time saved on negotiating