Cashflow is a challenge for just about any business these days due to the high cost of goods and services lately. When there is a credit or cash crunch then this can hold a business back and impede its growth. In some cases, it can even cause the business to fail since things are not able to be paid on time.
There are ways to improve the cash flow even when things seem to be desperate. Taking steps will allow your company to find some creative ways to keep the cash flowing in and out in a timely fashion so there is never a problem with not being able to pay things like labor or invoices. In this article, we will cover several ways to improve your cash flow problem.
1 – Create a forecast
Looking ahead and anticipating expenses is very important to be able to have a healthy cash flow. This is because your spending plan will change according to when you think revenue will be low or there will be a lot of anticipated expenses. Looking ahead prevents you from doing something like investing in a lot of new equipment at the same time you expect there to be a gap between jobs.
The best way to be able to forecast is to use some software that is designed and developed for construction businesses. For instance, you can take a look at a platform at procore.com that will help you develop a forecasting plan based on historical trends in your company.
It’s important that whatever software platform you use gives you the ability to examine past data about income, expenses, and payments so you can make projections for the future.
2 – Outsource
There are a couple of major expenses that every construction business faces. Labor is one of them. It makes sense to outsource parts of the job that your staff will waste time doing. This frees them up to do the parts of their job that will help to grow the business and ad revenue.
Hiring a company to do things like HR or accounting will end up saving you money in the long run and help keep your cash flow from being tied up in labor.
You can even outsource the equipment which is another major expense. Instead of tying up a lot of money into buying expensive equipment, you can often rent it for specific jobs.
3 – Have an incentive program
It is the dream of every accounts receivables department to have clients that pay the invoices quickly. The problem is that many of their clients are also experiencing cash flow problems. This means that they wait until the last minute to pay their invoice.
To get around this and have more cash coming in right away, you can implement a rewards program. This means that you can give a discount to those that pay their invoice right away. It might be worth it to your company to give out a 5% discount if they pay the invoice upon receipt, for instance.
