No one knows better than a construction company owner that success in this tough industry requires a regular cash flow. Of course, keeping a steady stream of cash can be far easier said than done. Stay current with this advice from pros.
Financial Management In Real Time
Although running a construction business has always required a steady hand on cash flow, current conditions make financial skill ever more pressing: “Each factor can impact profitability and growth, such as insufficient cash flow, loss of organization, and lack of clear processes and decision-making. To overcome the challenges unique to this industry, construction and contracting business owners need well-established accounting practices, up-to-date balance sheets, and digital tools to support strong financial management.” At Intuit, Sandy Edwards reminds us that these days, the ability to leverage data for real-time financial insights, as well as digitizing accounting and billing process are keys to success:
Digital tools can be incredibly valuable in providing business owners with real-time insights that can help you plan and react quickly. Consider technology platforms that can integrate and consolidate all of your data to give you one holistic picture of your business and generate cash flow statements whenever you need them…..Having a clear view of money flows can allow a business to determine whether it’s a good time to hire someone, reduce inventory, or improve order accuracy, so your inventory management team only orders what your customers really need or want. By leveraging real-time data analytics software to consistently review and enhance your cash flow, you can ensure your business remains financially resilient and well-positioned for growth.
Putting solid cash flow practices in place can be tough for every business owner, but tend to be most challenging in construction, since the business “involves a multitude of direct and indirect costs that require meticulous tracking and allocation…,” making solid digital accounting solutions that offer these kinds of capabilities a must:
- Provide customized charts of accounts with categories like labor, materials, subcontractors, or equipment
- Set up items and services to send an invoice or process a subcontractor bill with ease
- Organize various customers and projects to streamline workflows
- Track time, expenses, and payroll all under one umbrella.
Incoming: Payment Please
Given the focus on “payment for progress,” in construction, late and inaccurate invoicing, as well as messy or conflicted change order situations can really tie a business in knots. Savvy owners, as Gary Bartecki points out, consistently follow a weekly practice for estimating cash receipts and payroll, as well as fixed and other payments, to “stay ahead of the game should you start running short of cash.” The ability to quickly convert short-term assets into cash also gives builders leverage:
Accounts receivable, notes receivable, work-in-process (WIP) and any hard assets sales all convert to cash receipts….The WIP…has to be converted to an invoice as soon as possible…. The invoice has to be problem free with all required back-up so that you can get an anticipated payment date. Every day you gain converting WIP to cash makes a big difference. And when you get a check, it MUST be deposited that day. It does you no good to speed up the billing by a week if you let the check sit on your desk for three days.
Ready To Move Ahead?
Construction company owners can access practical financial intel every day, from the private owner’s dashboard that comes with The Partnership Account® for Contractors. In fact, as soon as you qualify for The Partnership Account® from Colonial Surety Company, you’ll get an edge on the competition with:
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Leap Forward Today:
The Partnership Account® for Contractors
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