3 Tips for Construction & Trades for managing Cashflow
Being a construction or trade business owner can be incredibly stressful. In addition to the long days and difficult working conditions, you often worry about cash flow issues. It can take a long time to collect on payment from your clients or contractors who hired your business, and in the meantime, you have to pay employees, cover fixed expenses, buy supplies and pay your own subcontractors.
Here are three tips to help you manage the cash flow in your construction or trade business.
1. Be aggressive in following up on invoices
Construction or trades small businesses are at a risk of having their clients not pay them on time. Or at all. Being too passive in collecting on unpaid invoices or reminding clients when payment is due will not help you collect the money you need to pay your bills.
Sending out reminders of invoices that are due can not only speed up the process of getting you paid, it can also encourage clients who were considering not paying you to reconsider. Reach out to clients to discuss payment options if necessary. Even a payment schedule is better than no payment at all.
The worst thing you can do is sit around and hope your client will pay you.
2. Watch for scope creep
Scope creep occurs when clients or other project stakeholders change a project’s goals or deliverables. Almost all projects experience some form of scope creep, but too many changes to a project can severely impact your bottom line, and it can hurt your cash flow.
Make sure the terms of your project are set out clearly and let clients know that any changes to the project will result in additional fees. If a client then attempts to change the project, you can remind them about the original agreement and the additional fees. If they insist on making the changes, you are free to charge the agreed upon amount.
3. Consider delegating the financial tasks
Many construction & trade business owners become self-employed because they have the skills, not because they want to be a full time business person. The financial aspects of running construction and trades businesses can be complex and can take a great deal of time and planning. That can add a lot of responsibility to the business owner.
Engaging a professional to take care of the financial aspects of your business, or even to advise you about the decisions you face, can take the stress off you. That’s exactly how we can help. Having a dedicated financial management partner on your side with financial expertise that can assess your business and advise you about your cash flow will add value in the long run with the time and money you’ll save not to mention the peace of mind you will gain.
Most small business owners face cash flow issues at some point in their career. Unfortunately, those in construction and trades businesses typically have a more difficult time managing cash flow. The large scale of the projects, the multiple stakeholders involved, and the number of factors that can go wrong on a project all increase the financial risks.
Following a few steps can greatly enhance your cash flow and make financial management in your business an easier process.
Please get in touch to find out how we can help your construction or trades business.