As a construction business owner, it's important to keep a close eye on your cash flow. Even if you're making a healthy profit on a job, if expenses start to outweigh revenue, it can put a strain on your finances.
That's why it's crucial to monitor cash flow and make sure you have enough funds to pay your bills and keep your business running smoothly.
One way to do this is by creating a 13-week cash flow forecast for your construction business. This will help you predict and manage your cash flow, so you know exactly how much money you'll have in the future and what you need to cover your expenses
Invoicing your customers as soon as the job is done is key to keeping your cash flow steady. Many construction jobs only pay you once the job is completed, so don't delay in invoicing or it could harm your cash flow and limit your ability to cover expenses and invest in new projects. Improving the communication between the project manager and the accountant or bookeeper can speed up the invoicing process.
Negotiating better payment terms with suppliers and customers can also go a long way in improving your cash flow. And don't forget the importance of establishing good accounting and financial practices, like tracking job costs and budget, keeping accurate records, and monitoring expenses.
If you can, consider financing fixed asset purchases, like equipment or vehicles, to keep more cash on hand for other expenses and future projects. You can also finance materials, such as supplies or raw materials, to keep more cash available.
At Arnold CPA, we can help you put these best practices into action and ensure that your construction business is financially healthy. Don't hesitate to reach out if you need any assistance.
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