A contractor needs to improve cash flow management. The company currently invoices at project completion but has 90-day payment cycles. What would be the BEST strategy to improve cash flow?
Correct Answer
B) Implement progress billing and require deposits
Progress billing allows contractors to collect payment as work progresses rather than waiting until completion, while deposits provide upfront cash. This significantly improves cash flow timing without negatively impacting relationships or operations.
Why This Is the Correct Answer
Progress billing allows contractors to collect payment as work progresses rather than waiting until completion, while deposits provide upfront cash. This significantly improves cash flow timing without negatively impacting relationships or operations.
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