Revive Your Cash Flow And Watch Your Profits Skyrocket

Revive your company cash flow and watch your profits skyrocket

Managing a business is not only about providing exceptional services or products; it’s also about ensuring the financial health of the enterprise. Without good cash flow, a business is on a short road to failure. In this guide, we delve into ten pivotal strategies to revive and maintain a healthy cash flow, ensuring sustained profitability and growth.

 1. Stop, Breathe, and Assess

The first step to solving any issue is understanding it. Allocate time regularly to shut out day-to-day operations and meticulously review all expenses. Note every financial transaction within each department to identify potential savings and efficiencies. This process, done every few months, can reveal areas of waste and opportunities for renegotiating terms both in payable and receivable accounts.

2. Negotiate Better Payment Terms

While net 30 terms are standard, they’re not set in stone. There’s room for negotiation, especially if your services or products are vital to your general contractor (GC). Consider asking for bi-weekly payments or even for the GC to cover specific upfront costs like payroll to improve your cash flow. If you're a specialty niche and the GC needs you OR you have a minority certificate that they need to get their own contract they'll work with you. Align yourself with financially stable GCs who have the liquidity to honor payment timelines.

3. Secure Mobilization Money

Never hesitate to ask for mobilization money on your projects, especially larger projects. Home remodelers should always receive money upfront for materials and contractors in commercial and heavy civil need to mobilize and put up money for the first month or so of payroll. So don't be shy to over-ask on mobilization. This upfront payment is essential for covering the initial expenses like transporting equipment and purchasing the first few loads of materials. A couple of percent of the total project cost isn’t an unreasonable request, and can ease your cash flow considerably.

4. Reduce Waste

Overstocking materials months in advance can result in significant losses due to theft, damage, deterioration, and taking up your cash! Aim to procure materials just a few days before they’re needed on-site. This can be managed effectively through detailed two-week and four-week look-ahead schedules, ensuring you have what you need without the financial drain of excess inventory.  The only exception to this is material with long lead times especially if they're driving your critical path items on your schedule.

5. Cut Recurring Expenses

Recurring expenses can silently bleed a business dry. Engage resources or agencies that specialize in auditing your operational costs. By frequently assessing expenses like software subscriptions, insurance rates, and even utility costs, you can significantly cut down on unnecessary spendings.

6. Increase Field Productivity and Productions

For labor-intensive contractors, boosting productivity on the job site translates directly into higher profits. Clearly communicate project scopes, expectations, and benchmarks to your team. Effective management and the right resources can improve productivity by a few percent, leading to considerable financial gains. Numerous articles and videos can be found by clicking here.

7. Perfect Your Invoicing Process

Mastering invoicing is critical. Ensure your accounts payable and receivable processes are robust and timely. Late or inaccurate invoices can choke cash flow, making it imperative to have either skilled in-house accounting staff or employ part-time bookkeepers as needed. Adherence to agreed payment terms (from net 14 onwards) smooths cash operations. More about perfecting your finances can be found here and here.

8. Meticulously Track Payables

Understand and document every detail of your payable accounts. Only you should determine what work was installed and what you should get paid. Logging daily and weekly work, and the corresponding costs, ensures accurate end-of-month billing. Proactive billing—even overbilling slightly—can be a buffer against payment delays, keeping your cash flow steady.

9. Ensure Accurate Estimating

Accurate estimates are the foundation of profitable projects. Oversee your estimations meticulously, considering logistics, project specs, and potential risks. Collaboration between estimating and project management teams must be seamless, ensuring budgets align with actual field capabilities. Continually refine your estimating process for each unique project characteristic.

A video about effective takeoffs can be found here.

10. Streamline Change Order Management

Inefficient change order management is a profit drain. Identification, documentation, and processing of change orders should be immediate and accurate. Regular tracking, daily sign-offs, and submission while changes are fresh in management’s mind prevent backlog and ensure fair compensation. Lax practices in this area can lead to financial losses, even in multi-billion-dollar projects.

A dedicated video about identifying and pursuing change orders can be found here.

Effective cash flow management is fundamental to the success and growth of any business. From negotiating better payment terms to streamlining invoicing, each strategy must be thoughtfully implemented and consistently monitored. By integrating these practices, businesses can not only avert potential financial crises but also propel towards higher profitability and stability.

Stay informed, stay proactive, and watch your profits soar!

To set up a Free Consultation, email Jerry Aliberti at jerry@pro-accel.com