5 Tips to Have Better Cash Flow For Your Construction Company

Jerry Aliberti • April 12, 2024

5 Tips to Have Better Cash Flow For Your Construction Company

Cash flow reigns supreme in every business. Yet, many construction businesses struggle to maintain healthy finances with fluctuating project demands and market conditions. Jerry shares his five indispensable tips for enhancing cash flow within your construction company.

I. Know Your Numbers:

Understanding the intricacies of your financial landscape is paramount. Unit prices that don't change with time and vague estimates can spell disaster. Instead, promote a culture of precise cost tracking and collaboration between estimators and project managers. Real-life examples underscore the importance of sharp and accurate estimates. The synergy between your estimating and project management departments is critical for the success of your company and projects.

II. Invoice Frequently:

Delayed invoicing can severely hamper cash flow. Implement systematic invoicing processes and leverage the expertise of a CFO to streamline accounts payable and receivable. Discover effective strategies for ensuring timely payment collections to keep the cash flowing steadily.

III. Manage Your Overhead:

Uncontrolled overhead costs can erode profitability. Identify and challenge common overhead expenses, from cluttered shops, old equipment, non-productive management to insurance rates. Regular assessments enable you to trim unnecessary spending and optimize resources efficiently.

IV. Handle Scope Creep and Change Orders Effectively:

Scope creep is the silent killer of construction projects. In addition, learn to manage and charge for change orders effectively, emphasizing daily T&M ticket sign-offs and clear communication strategies. Discover the pivotal role of morning huddles in aligning teams, mitigating rework and identifying change orders quickly. Don't forget to bill frequently and stay on top of change orders.

V. Avoid Delayed Payments:

Navigating through delayed payments requires finesse. Equip yourself to deal with challenging GCs and cultivate strategies for finding better-paying projects and clients. Negotiating retainage terms and understanding mobilization costs are vital steps toward cash flow resilience.

VI. Develop a Forward-Looking Finances Strategy:

Embrace a proactive approach to finances by front-loading projects responsibly and planning for end-of-project expenses. Front loading a project can be dangerous if you don't manage cash flow properly.

Incorporating these five key tips into your construction business can revolutionize your cash flow management. We invite you to engage with us, share your experiences, and join us on the journey to financial prosperity in construction.

Learn more about how Pro-Accel can help you maximize cash flow by visiting our Operation Assessment page.

Does your company struggle with cash flow? Book a meeting with Jerry to learn how he helps companies like yours grow and become more profitable. Click on the button below to schedule a Free Consultation or email jerry@pro-accel.com

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