Managing Your Cash Flow Is Vital To Your Construction Business

Published by Dan Poulsen on

As a small business owner looking to grow your company, every penny matters. You should be paying careful attention to your cash flow, which is vital to your construction business. Cash flow provides a clear look at the financial health of your company. Below, you’ll find everything you need to know.

How To Determine Cash Flow 

Hopefully, as a small business owner in the construction industry, you’re familiar with cash flow. If not, now is a fantastic time to learn. Cash flow is the tracking of money that moves in and out of your company. You can determine cash flow by subtracting your expenses from your earnings. Expenses represent a broad term that also accounts for your: 

• Liabilities 

• Depreciation

• Receivables 

When your costs exceed your income, you’re considered “in the red.” Being in the red means that you’re losing money, the ultimate downfall of any company. Fortunately, cash flow provides you with an accurate depiction of your financial health. Many small business construction owners have used cash flow to identify problems in their company before they become a significant problem.

For instance, one small business owner reviewed the expense portion of the cash flow section and noticed that the company was spending a lot on payroll. Upon looking into the issue further, the owner realized that the company was wasting money correcting payroll errors. The company decided to switch to a Timecard Pro system

Switching to a Timecard Pro system allowed the business owner to streamline the payroll process and cut down on errors. It also reduced the need to have an individual dedicated explicitly to handling payroll since the system linked to the company’s payroll system seamlessly. Lastly, the Timecard Pro system cut down on expenses from managers having to deliver time sheets each week. 

Why Positive Cash Flow Is Essential 

It should come as no surprise that positive cash flow is vital to the health of your company. Having a positive cash flow allows you to pay bills and employees without sweating. Positive cash flow could also help your company grow, putting you in an excellent position for success when dealing with: 

• Lenders

• Investors

• Creditors

• Vendors 

This allows you to take advantage of business opportunities as soon as they arise. No matter if you’re looking to hire more employees or purchase a new piece of equipment, having capital available at your disposal allows you to do so. 

Don’t Be Afraid To Ask For Help 

Many small business owners in the construction industry are afraid to ask for help when it comes to their company finances. They may often take the approach of, “I got myself into this mess, I can get myself out.” Unfortunately, there are far too many people and careers at stake for owners to take this approach. Owners should be willing to seek help from financial advisors to help ensure their company remains financially healthy and profitable. 

[Download] The Ultimate Guide To Higher Construction Business Profits In 2019


Leave a Reply

Your email address will not be published.

0 Shares
Share
Tweet
+1
Share