Managing cash flow is never a piece of cake. Now, in the midst of a global pandemic, it’s become even more challenging for businesses within nearly every industry. For many contractors and construction-related businesses, the cash flow conundrum is two-fold: As projects stall and staffing rosters fluctuate, keeping track of cash is more important than ever.
The good news is, there are simple things you can do to better manage your cash flow, and even increase it—without having to rely solely on cutting costs. Here are a few practices to consider implementing in your business today.
Improve Your Business Cash Flow
Collect from your customers more quickly
To do this, you must first get your invoices out ASAP. Then, see what you can do to collect more quickly. Could you strengthen your relationship with the person who pays you? Have you examined your aging receivables to determine which are at 30, 60, and 90 days? How will you follow up to collect?
It’s worth taking a look at any unreleased retentions you may have, too. If a customer withholds a retention, it could easily eat into your profits on the job. Once the owner has signed off for punch list and warranty details, don’t let the retention sit there—make sure your customer releases it as promised.
Stretch your payables if you can
If you haven’t already, see if you can negotiate better pricing or payment terms with your vendors, suppliers, and subcontractors. On a similar note, avoid using working capital cash to finance long-term assets, such as vehicles or technology, if you don’t have idle or excess cash. Instead, if you have equity on equipment or assets, see if you can use it to secure long-term financing.
Don’t let your cash be tied up in inventory
It’s critical that your assets work for you. Pay close attention to the timing of when you order materials or equipment. If they end up sitting at a job site or in a warehouse, they won’t be working for you, but they will be tying up your cash!
Invest in technology
Anything you can do to improve your efficiency and effectiveness can help you save cash in the long term. Equipping your superintendents and project managers with laptops or tablets, for instance, could enable them to do more at the job site, preventing them from having to come back to the office to enter data or send project communications. Likewise, investing in a cleaner, more efficient piece of equipment could allow you to reduce personnel hours.
The coronavirus pandemic has, of course, jolted many businesses into remote-work setups, which rely heavily on technology. What can you do to leverage this “new normal?”
Know your cash flow
In these turbulent times, it’s hard to predict what could be around the corner. But knowing your cash flow—and taking steps to better manage and increase it—could help to keep you on secure footing for the long haul. Each business’ cash-flow situation is unique, so it’s important to take the right approach for managing yours.
At JAK, we can help you gauge your cash positions through a cash-flow projection and analysis. We can also conduct a financing technology analyses to help you determine next steps. If you want to get started, contact us today.