Understanding your construction company’s cash flow is crucial to making sound business decisions. For example, when you know your business’s cash flow, you are better equipped to comprehend your margins, appropriately adjust your bids, or know when to spend and on what.
Think of Cash Flow Like a Lake
There are ways that water enters a lake. They are:
Direct precipitation
Nearby melting ice and snow
Streams and rivers
Groundwater baseflow
And there are ways water leaves a lake. They are:
Evaporation
The outflow of rivers or streams
Groundwater seepage
Rather than water, your construction business receives cash in several ways. Some of those ways are:
Sales
Loans
Selling assets
Refunds from suppliers
Price increases
Inventory management
Likewise, cash leaves your construction business in several ways. They include:
Payroll
Rent or mortgage
Utilities
Insurance
Marketing and advertising
Professional services
Software and subscriptions
Travel and entertainment
Interest and finance charges
Inventory COGS
Equipment maintenance and repair
Furniture
Membership dues
Vehicle expenses
Business licenses and permits
Learning to adjust intake and outflow allows you to manage your lake (your construction business) more efficiently and with better profitability outcomes.
Cash Flow – The Bottom Line
Your construction company’s operating, investing, and financing activities are reported regarding incoming and outgoing money. You must constantly make money-related decisions. Therefore, understanding how those decisions affect your ability to run a profitable construction business is imperative.
As you become more comfortable with cash flow and the tools used to manage it, you’ll gain confidence and increase your ability to drive even more financial aspects of your construction business.
Cash Flow Affects Everything
Did you know that 46% of businesses in the construction industry face severe cash flow issues? Billd’s 2024 Market Report highlights this cash flow struggle, which impacts project timelines, payroll, and growth.
At The Profit Constructors, we’re here to help. We’re rolling out our 90-Day Remodel service soon. It takes the guesswork out of Accounts Receivable and Accounts payable (your lake’s inflow and outflow) by sorting through the noise to uncover exactly who owes you what — and what you owe to others. This provides the clarity you can trust. We also institute a cash management system to track every penny, giving you control and confidence in your financials.
Imagine the relief of clear, predictable cash flow. Let’s connect to bring clarity and control to your business.
Ambitious Construction Contractors look to The Profit Constructors to provide advocacy in dealing with:
Clients and customers
Employees and subcontractors
Vendors and service providers
Governmental entities
Working with The Profit Constructors gives Construction Contractors the means to organize their operations in ways that help them:
Remain informed
Avoid hassles
Reduce risks
Be future-ready
Ready for action? Or want to know more? Get in touch today to schedule a complimentary discovery call. 866-629-7735
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