One of the biggest barriers to a construction company’s growth is cash flow. Even though it isn’t a cash in hand type of business, it is one in which there are a lot of outgoings involved to have money incoming. If you are short on cash, then it means that you can’t complete projects on time.
There are of course some ways to make sure that your cash flow is always positive so you can grow your business and be profitable. In this article, we will go over several strategies to make sure that you keep your cash flow from being a barrier to your growth as a business.
Table of Contents
1 – Automate
You may have an excellent bookkeeper or team of accountants, but automating will help them to handle invoicing and accounts receivable in a much more efficient way.
There are a lot of building software suites that can handle your invoicing so they get sent out in time. When you have clients that do actually pay on time then having the invoice get to them early will ensure that they are able to pay on time.
You can set up the software to send out early invoices which rewards clients that pay early with a discount. And, for those clients that are slow to pay, automatic reminders go out after a certain amount of time past the deadline.
Sometimes projects don’t go according to plan and there need to be requests for additional payments. This can also be done automatically during the construction phase so there is no delay in getting the cash to continue working.
2 – Outsource
Payroll can take a big bite out of your revenue. And when there are pauses between jobs, it can cost quite a lot to pay people when there is little work to do. Outsourcing is a great way to solve that problem.
For instance, do you need a marketing team to get word out there about your company? Probably not, but there are times when having a marketing team can really help you get new clients. Outsourcing this work means you only pay when it makes sense.
The same can be done for just about every department as long as the job they do is only going to be when things are busy. When things slow down, you simply end the project or contract with the freelancers that you used.
3 – Forecast
Having an accurate budget is essential to running a profitable business. The problem with construction is that many jobs start and end at odd times. There are often periods of downtime in between projects.
Forecasting when these downturns will be cannot only help you budget accordingly, but to also try to find projects that can fill those gaps. If you are outsourcing then you know when to hire a freelancer or agency. Or, if you need to budget for materials then you know how much will be coming in.
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