Solving cashflow in construction business

Solve Your Construction Business’s Cashflow Problems

Every successful construction business is based on a healthy cash flow.  It’s the lifeline that enables companies to keep moving forward in this fast-moving sector.  Ensuring construction companies can adapt to changing circumstances and buy materials, pay salaries, start new projects, and cover overheads is dependent on good cashflow.

Like any busy artery, any blockage in the flow of cash can cause entire projects and sometimes, businesses to stumble.  In worst case scenarios, the result could be insolvency, and certainly reduced profit.  However, there are number of steps owners can take to ensure that your company can keep cashflow moving and build in resilience to the inevitable disruptions. 

Causes of Cashflow Disruption

Being aware of the challenges facing cashflow in construction projects, will help you, and your team, to watch out for the signs of issues ahead and navigate them successfully.

Here are four of the main causes of disruption

  • Poor payment terms with the customers
  • Late payments 
  • Overrunning projects – this may be due to lack of accountability, materials, or unreliable labour
  • Rapid expansion – resulting in more work in your pipeline than cash to fund the resources you need to continue

Resolving these issues is much easier than you might think.  

Here are some cashflow solutions

  • Always agree a payment schedule with your customers before you start work. Agree on triggers that release the next payment, and make sure they match up with the timing of any expected outgoings on the project
  • Secure a deposit for the project before work begins
  • Raise invoices promptly and follow up when they are not paid on time.  This can be very easily managed when you are using cloud accounting software like Xero.  Plugins such as Chaser can automate friendly reminders when payment is late and can dramatically improve turnaround time on invoice payments
  • Raise invoices promptly – Delaying sending out invoices limits your financial flexibility and gives out the wrong impression to your customer.  Again, cloud accounting software all but automates this if you keep it updated with the right information
  • Seek vendors discounts where needed and agree a credit line with them if possible.
  • Improve credit control and ensure that customers agree to the payment plans before you start
  • Review your finances on the weekly/bi-monthly basis

Here at Accurox Accountants, we can help you manage your cash flow by introducing robust accounting and cash flow systems. You can utilise our finance function to manage your finances in a central location.  We’ll ensure you are set up with the best cloud accounting software, such as Xero and the best apps for your needs, and we’ll happily walk you through their use.  

Our clear communication approach and experience in the construction industry sector mean that we can help you – Help you to improve your cashflow and grow your business. 

Accurox can help you to:

  • Improve cash flow
  • Manage supplier payments
  • Encourage customers to make their payments without the sweat
  • Do your weekly and monthly billing
  • Send accurate quotations to your customers more quickly, helping you to win more great business
  • And much more

Remember – Profits First

Before committing to any project, construction companies must clearly establish the estimated level of profitability. Surprisingly, even marginally profitable projects can boost your company’s finances.  So, always estimate the profit and produce budgets that can be carefully tracked and measured.

Want to know more? Contact us to set up a meeting

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