PLG Subcontracting Observation #1 > Cash Flow

One of the biggest challenges for subcontractors is CASH FLOW management.  You can make an accounting profit and still get wiped out.  This can happen in any economic climate, but is a particularly acute problem in a down market when competitive pressure is severe.  The current prolonged slump  in the construction industry has stretched the financial capacity of even the best of subcontractors.  Subcontractors are often at risk for cash flow imbalances because they indirectly serve as the financing arm for developers, owners, general contractors and government agencies.  They are also at lower rungs of the contracting ladder, at least two-to-three levels removed from the money.  The construction supply chain is largely financed on the backs of subcontractors.  In a tight market, the cost of money can be squeezed out via the bidding process, increasing the risk that late cash receipts will erode profitability.

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