Oddly, many construction firms admit that they find it harder to manage their cash flow than to find clients. As your trade business continues to grow, you might find it frustrating to manage a positive cash flow. However, a healthy cash flow is important to any business and it can make a difference between a successful and failing one.
Gaps and inconsistencies in cash flow may leave you not being able to attend to your bills properly, order inventory or pay contractors and employees on time. You need to avoid inefficient practices at all costs, as seasonal inconsistencies, inventory surplus, equipment issues, overpaid vendors, and delayed payments can wreak havoc on your cash flow balance.
Start creating a sequence between your project cash flow and company cash flow. These have to align! Projects move fast, so it’s important to align them with your company expenses. For example, you can plan your typical business quarterly expenses before bigger expenses are due, so they don’t get all mixed up into a mess.
Your accountant will help you understand your finances with tools that you can use to make adjustments, level out your cash flow in time for rapid payments, and ensure you have funds for unexpected overheads – without having to rummage your pocket every time. You can also take advantage of upfront discounts from contractors!
Make no mistake – a cash flow cycle that’s too stretched out will almost certainly ruin your cash flow. You need to break up your invoices and buy only the inventory you need, receive payments upfront, and hire extra staff only during busy seasons. You will be surprised at how this can significantly improve your cash flow. This means more money in your pocket and an improved customer experience through instalments!
Invoice software systems can also pave the way to healthier cash flows. These can create estimates and issue invoices and receipts for you, so you can receive payments faster. Who doesn’t want that? One of the best invoicing software out there is Xero, which helps you with bank connections, claiming expenses, paying bills and even calculating GST. You can also use automated payment software that integrates with your invoicing software – we could go on and on!
Lastly, you need responsible project managers and of course, accountants to monitor the ins and outs of cash in your projects. You’ll need a responsible team of project managers and accountants, who have the right training in cash management.
Get that machine oiled and running and have the peace of mind of knowing your finances are well taken care of! Remember that some of these are executed in the planning stage, while others are worked on throughout the job or project. Pick an accountant that’s experienced in the construction industry, so he or she knows what to do and offer invaluable extras such as helping you with other potential revenue channels you might be missing!
Give us a buzz to chat with us and sort out your cash flow concerns!
Your Outside Team
Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
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