How to Optimize Construction Cash Flow

Rising material prices and changing economic conditions make managing cash flow a delicate task in the construction industry. To generate healthy profit, you need knowledge, planning, cooperation, and foresight. While costs and conditions may change, there are a few methods of optimizing cash flow that are sure to help your business be the best it can be.

Establish Accounting Procedures
Creating precise procedures at the beginning of projects and following them throughout can help you accurately monitor incoming and outgoing revenue. During projects, use a cash flow chart to keep track of all expenditures to ensure that you and your employees stick to the plans you’ve established.

Predict Future Cash Flow
Before each project, conduct an analysis of your potential expenses to account for any surpluses or shortages. This analysis will guide you in budgeting so you can stay on target and under budget. Calculating your billing schedule and payments made can eliminate the possibility of missing bills or overpaying.

Improve your pricing model by charging for Profit
Underbidding and underbilling are the two main sources of cash flow problems for construction companies. To avoid these problems, remember to submit accurate estimates with pricing that will account for all your costs, any issues that may arise, and profit left over for you. It’s essential to include labor, materials, equipment, overhead, and profit when picking your price.

Automate with Invoicing Software
It’s easy for deadlines to slip past you during busy projects, but unlike some, being behind on your billing schedule directly affects your cash flow. To keep things on track, set a billing schedule based on work progress with software that automatically sends out your invoices. Automated invoice software can also offer your customers alternative payment methods, so you get their payments without any trouble for them or you.

Track Metrics & Performance
Metrics and key performance indicators allow you to see your company’s working capital and over financial performance. You can track revenue by day, week, month, or job, and use these reports to influence your decision-making by identifying areas for improvement. You can also get a greater understanding of which jobs provide the greatest profitability, so you can choose future jobs that fit that structure.

Managing a construction company is a minefield at times, and having your attention split between managing workers, finances, and customer service can lead to mistakes and lost profits. Insta Answer is here to help. Let us take care of your customer service calls so you can focus on whatever else you need. Give us a call today.

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