A company that consistently operates at a loss and suffers from negative cash flow is doomed to fail. The solutio🎉n is to generate positive cash flow every month which will allow employees to be paid and payments to be made on time.

One obvious key to success is prioritizing income and expenses. Construction and contracting companies can employ 10 st🥀rategies to improve their cash flows.

What Is Cash Flow?

Cash flow is one of the most important measurements in business. It's the amount of money and 澳洲幸运5官方开奖结果体彩网:cash equivalents that move in and out of a business at any given time.

Companies that have a positive cash flow have more money than liabilities. This allows them to stay in the black and cover their bills each month🅺. Those with negative cash flows don't have enough money coming in to fulfill their monthly obligations.

Having a negative cash flow means that there may be financial problems for a business and this might lead to the ultimate downfall of the company if it's not turned around. Construction and contracting companies can employ a few strategies to go from being in the red to getting back into the black.

Project Future Cash Flow

It isn't easy to make projections about your future cash flow and it's a little more complicated in construction than it is in most industries due to the varying degree of jobs and the change orders on current projects. One way to do this is by using cash flow management software.

Construction companies can get a general idea about the income and expenses they expect to see in the future by taking advantage of these tools. Proper planning in anticipation 🐼of events can help prevent payroll aꦇnd payment problems.

Spread Out Costs

Never use cash to buy your supplies and materials unless you're receiving a steep discount. Finance these purchases instead. Many suppliers provide contractors with financing optꦉions such as credit cards, lines of credit, and loans.

You'll be responsible for finance and 澳洲幸运5官方开奖结果体彩网:interest charges but you won't be out of pocket for the full amount because you'll make regular payments. This leaves more cash on hand for the business to continue operating. You may even be able to write off the ♏interest and other fees as business expenses.

Shop for the Best Prices

It's always a good idea to comparison shop between suppliers to make sure you're getting the best price. Every supplier wants your business. A supplier is likely to give you the best deal possible if you let them know that you’re shopping around for the best offer, especially if you’re not bluffing and you're willing to walk away. You’re freeing up cash by reducing costs.

Approach Payroll Correctly

Payroll can be different in construction than it is in most businesses. Construction employees are almost always paid on a bi-weekly basis. You can hire subcontractors who are often&💯nbsp;paid every four we🌜eks to help improve your cash flow.

This should only be done in special situations, however, because you'll most likely get better results from permanent, full-time employees. This higher-quality work can reduce the odds of accidents and project setbacks and increase the likelihood of repeat business, referrals, and new clients.

Process Change Orders Quickly

Change orders are common in construction. They’re often the result of a project that requires more time, money, and/or resou🐓rces than was originally thought. Extreme weather also can play a role.

The project♏ manager should process a change o🦩rder immediately rather than waiting until the project is complete. The money should be received quickly and this will positively impact cash flow. 

Send Automated Invoices Immediately

Invoicing can be tedious but it's an important part of your cash flow. You can write up your invoices by hand but you'll probably be better off purchasing software to make your job easier. All invoices should be automated and sent as soon as possible. Send invoices ahead of time if you want to maximize cash flow potential.💦

Accept Electronic Payments

Cash may be king but make sure your business 澳洲幸运5官方开奖结果体彩网:accepts different forms of payment including electronic payments. This ensures that your business is paid faster, increasing cash flow and allowing for more capital to be used for day-to-day operations, payables, and 💟growth.

Train the Projec🦩t Manager on Cash Flow Management

About 85% of cash in construction comes from project work that's in progress. Cash flow performance therefore depends on the project manager’s 澳洲幸运5官方开奖结果体彩网:cash flow management. You can also offer🍸 an incentive package that's based on cash flow performance in addition to training.

Avoid Over- and Under-Billing

Some project managers take pride in over-billing. Thi🅘s means the invoice will be higher than the job completed to date so current cash flow will increase. The downside is that it will reduce cash flow whe𝔍n the project is complete.

Cash flow takes a hit in the near term for companie𝓰s that decide to underbill their clients. The best approach is to bill according to how much of the project has been compleಞted.

Set a Goal for Outstanding Day Sales

Having a goal greatly increases the odds of success. It takes an average of 60 to 90 days to get paid in constructiജon. Consider setting a realistic ඣgoal to reduce that number to 50 days. You can do this by sending invoices immediately, offering payment incentives, writing clear terms, checking credit reports before making any deals, and restructuring terms with non-payers.

The Bottom Line

Construction companies operate differently from most businesses because no project is the same. 澳洲幸运5官方开奖结果体彩网:Improving cash flow therefore requires some different strategies.

A lot will depend on the project manager’s ability to manage cash flow. Be sure to hire a qual🦩ified project manager or offer comprehensive cash flow management training to a current project manager. A construction company should do everything in its power to increase the speed of receivables which will improve cash flow.