Construction Cash Management Series: Part Two – Contract Award

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cashflow-icon-01Managing Company and Project Cash Flow for Profitability

In the first part of our cash management series, we focused on how effective financial planning starts at the Pre-Bid and Bid phase. Today, we discuss the Contract Award Phase and the key areas of a contract that may adversely impact cash management further down the line.

TIP: Once a contract is awarded, a construction company should perform a more intensive review of the contract and engage in negotiations to obtain more favorable terms that facilitate desired cash flows.

Contract provisions to consider include:

  • Timing of payments
  • Method of payments
  • Penalty provisions for not adhering to payment requirements
  • Reporting and documentation requirements
  • Allowable contract costs
  • Performance penalty provisions
  • Retention terms

It is up to you to ensure that your contract’s language won’t hamstring your efforts to collect payment and keep cash flowing through your project. Don’t get caught out by blindly accepting contract terms without negotiation.

Stay tuned to the Aronson Construction Report to read the rest of our five-part series on cash management. For more information on how you can improve your company’s chances for success, contact Michael Corcoran of Aronson’s Construction Industry Services Group at 301.231.6200.

 

Related Articles:

Construction Cash Management Series:  Part One – Pre-Bid and Bid

About Michael Corcoran

Michael Corcoran has written 52 post in this blog.

Michael (Mike) Corcoran is a CPA in the Construction Industry Services Group at Aronson. He has over six years servicing construction clients with Aronson and he has worked with a variety of construction contractors, such as electrical, heavy/highway, mechanical, and masonry subcontractors of up to $300 million in annual revenue. Mike specializes in providing assurance and tax services to construction contractors. He graduated with a Bachelor’s of Science Degree in Accounting from West Virginia University in 2004.

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