Construction Bankruptcies a Looming Risk For Material Suppliers

Construction Bankruptcies a Looming Risk For Material Suppliers


The economic downturn construction companies are facing is causing a domino effect and affecting other sectors such as building material suppliers. The low demand for new projects, frozen construction plans, and customer payment is putting many businesses in the construction industry to the test, and sadly, many are failing, causing a large number of businesses to declare bankruptcy. It is this financial breakage that is also negatively affecting the supporting materials industry as demand is dropping, invoices are becoming uncollectible and cash flow is becoming scarce. Failing to collect on past due accounts can seriously hamper a materials business and spending time on effort on these collections can aggravate the problem when collection efforts fail. The key to being successful in recovering past due funds is to have experience in working with these issues. Consider hiring a company that specializes in debt collections for the building materials industry.


A number of companies are declaring bankruptcies which cause materials invoices to remain unpaid. Construction companies rely on floating debt to give their own customers time to pay for an ongoing project, but when cash flow decreases they are faced with the inability to obtain the needed capital to resolve operational needs and their materials payments begin to fall behind. The ensuing damage caused by unpaid invoices to the materials suppliers can be severe. Materials suppliers have thin margins and new sales revenue to make up for losses can be significant.


Things You Can Do


To keep your business afloat you need faster collections. Customers need to know what your terms are so create clear invoice payment terms and send these to your construction business clients. Specify how you want to be paid, your payment due date, and the consequence of late payment. Follow up with the customer to make sure he understands your terms.


If the payment due date passes, follow up as soon as possible. The longer you wait, the harder it will be to collect and the more marginal your cash flow. If another week passes without payment follow up with a collection letter. To ensure you follow all legal requirements in your letter, ask an attorney to review it before you send it.


Talking about late payment is not a conversation a supplier or a customer wants to have. In fact, many situations can be made worse if the contact is made and the conversation moves past simply seeking payment and becomes combative. Below are a number of key points to consider when contacting your client for payment.


-Don’t let emotions get the better of you. 

-Don’t let anger overtake you.

-A threatening or harassing phone call can bring legal complications.

-Call during business hours. 

-Customers are more likely to be aggressive when called at home or in the evening.

-Prepare for the call by having the past due invoice in front of you.

-Take notes while speaking to the company. 

-Speak with a firm tone but be as polite as possible.

-Get the customer to commit to a firm payment date.


Hire a collections Agency that specializes in debt collections for building materials companies.


Congratulations are in order when you can successfully collect with a phone call. However, this is not always the case. If the customer seems to be making excuses, you may need to consider working with a collection agency.


Most collection agencies will work with debts over $100.00 so you shouldn’t worry too much about how small or large the debt is. Keep in mind though, the sooner you take action, the more likely you’ll get paid. The longer the debt goes, the longer an opportunity the construction company has to place this debt under the declared bankruptcy debt. If you need to avoid prolonging your invoice debt, a collection agency can help you regain the outstanding funds.


Collection agencies are becoming an important tool for materials suppliers as they allow businesses to take action when faced with past due invoices. These services can help materials suppliers get paid before a client declares bankruptcy. Delinquent payments by construction companies can slow down your cash flow and even put your business at risk. Hiring a debt collection agency will help you get paid faster and put your cash flow back in order.