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Construction Company Budget Vs. Cash Flow

Posted by Sharie DeHart on Fri, Nov 10, 2023

Finding some certainty can make all the difference in the unpredictable construction business world. While the future remains a mystery, budgeting and cash flow forecasting tools can significantly reduce uncertainty, allowing you to anticipate challenges, learn from past events, and enhance your ability to navigate your business.

Budget vs. Cash Flow: The Crucial Distinction

A common misconception is that a budget and cash flow are interchangeable. A budget is a projection of future possibilities, enabling you to consider various sales and expense scenarios. On the other hand, a cash flow provides a record of actual expenses and sales revenue that flow into and out of your business each month. Although they often deal with the same data, their applications differ.

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Topics: Cash Flow, Construction Accountant Who Listens, Construction Company Cash Flow, Contractor Tips, Construction Business Budget, Budget Vs. Cash Flow

Why Banks Won't Lend Money To Your Construction Business

Posted by Sharie DeHart on Fri, Oct 06, 2023

Getting approved for a business loan or line of credit is more complicated than qualifying for a personal loan. Small construction business owners must be adequately prepared to meet with a lender to present their business in the best possible light and ready for the money they need.

Think of all the times:

  • You loaned money to a friend or relative
  • Provided labor and materials for somebody's home or business without a deposit check
  • Did change order work that you never got paid for doing and never will
  • Gave a subcontractor/employee an advance on their paycheck, and you never got paid back

Multiply that by 100,000, and you will understand why banks seem so tight-fisted about loaning money.

 
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Topics: Cash Flow, Bookkeeping, Contractor Cash Flow Problems, Financing Secrets Revealed, Banking

Better Practices For Managing And Maintaining Your Business Cash Flow

Posted by Sharie DeHart on Fri, Sep 29, 2023

In the business world, cash flow remains the lifeblood that keeps your operations running smoothly. Whether you're a start-up finding your feet or a seasoned business in the construction industry, managing and maintaining a steady cash flow can be challenging. But a few small changes can make a world of difference to your cash flow and overall revenue.
 
Your business needs cash. Cash keeps your company in operation and enables it to grow, so you should know how much your business needs to survive. Although many think the answer is linked solely to operating expenses, this isn't true.
 
No single factor determines how much cash every construction business needs to have on hand. Somewhere between 3-6 months of operating expenses is an excellent baseline to start from, but there's more to it than that.
 
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Topics: Cash Flow, Bookkeeping, Contractor Cash Flow Problems, QuickBooks Construction Accounting, Improve Construction Cash Flow

Leading Causes Of Stress For Contractors And How To Counter Them

Posted by Sharie DeHart on Fri, Jun 09, 2023

Construction business owners face various sources of stress that can negatively impact their well-being and overall business performance. Some leading causes of stress for construction business owners include financial pressures, tight deadlines, workforce management, safety concerns, and regulatory compliance. If not adequately addressed, these factors can lead to burnout, decreased productivity, and even business failure. 

Many entrepreneurs believe hard work and determination are all it takes to build and sustain a successful business. But when you consider the pressures of running a company, it seems wise to add effective stress management to the list. Left unchecked, stress can erode your passion and undermine performance – not to mention a severe toll on your health.
 
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Topics: Cash Flow, Construction Accountant Who Listens, MAP vs. PAM, Contractor Cash Flow Problems, Do What You Do Best And Outsource The Rest, Contractor Tips

How To Increase Your Construction Business Profit In Three Months

Posted by Sharie DeHart on Fri, May 19, 2023

Sales and profit are two very different things – as a construction business owner, you can find yourself without the cash to pay bills despite making sales you knew were profitable. You may also be startled to discover that solid cash flows from sales deliver little profit.
 
A cash flow forecast tracks cash flowing in and out of your business. The timing of these flows enables you to identify cash-rich and cash-lean periods. This helps make the right decisions, such as buying assets or preparing for cash shortfalls.
 
Cash flow is essential to the survival of your business – arguably more so than profit in the short term. Profit may be necessary for the longer term, but cash is needed to pay bills and operating costs quickly.
 
For example, if you're a plumber with reasonable cash reserves, you can survive until your business becomes profitable. However, if your business runs out of cash, you'll need to find a solution quickly to avoid going bankrupt.
 
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Topics: Construction Cash Flow, Cash Flow, Construction Accountant Who Listens, Contractor Cash Flow Problems, Contractor Tips, Improve Construction Cash Flow

Unlocking The Secrets Of Small Construction Business Cash Flow

Posted by Sharie DeHart on Fri, Apr 28, 2023

Cash is king! Construction Company cash flow is the movement of money in and out of your Construction Company; these movements are known in accounting circles as inflow and outflow. Inflows for your Construction Company primarily come from selling goods or services to your customers, but keep in mind that inflow only occurs when you make a cash sale or collect on receivables. Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

Outflows for your Construction Company are generally the result of paying labor, material, other direct and indirect costs of goods sold, and overhead expenses.

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Topics: Construction Cash Flow, Cash Flow, Construction Accountant Who Listens, Contractor Cash Flow Problems, Contractor Tips, Improve Construction Cash Flow

Ways To Sustain The Life Line Of Your Construction Company

Posted by Sharie DeHart on Fri, Jun 24, 2022

Cash flow refers to the movement of money into and out of your business. It's based on the amount of money you bring in minus the amount you spend. A positive cash flow means bringing in more than you're spending. A negative cash flow means you aren't bringing in enough to cover your expenses.
 
Your construction company can run into problems by not charging enough for goods or services, having late-paying clients, growing too quickly, or simply spending too much money.
 
Solid cash flow management is vital to ensuring your contracting business survives, but not everyone understands what cash flow is or how to manage it. That's likely what makes it a leading cause of stress for small business owners. 
 
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Topics: Construction Cash Flow, Cash Flow, Construction Bookkeeping And Accounting, Increase Cash Flow, Construction Systems And Processes, Contractor Guidance

Brace Your Construction Business From Recession

Posted by Sharie DeHart on Fri, Jul 17, 2020

The pains caused by an economic downturn can be excruciating, which is why most of us dread it.

A recession can mean massive layoffs, jobs becoming harder to find, and wages frozen, which means consumers hunker down and spend less-- often worsening the slowdown unknowingly. 

For most businesses, especially small businesses, recessions can be brutal. Just take, for example, the Global Financial Crisis (GFC) that struck the world in 2008. Between December 2008 and December 2010, approximately 1.8 million small businesses shut down. When Investopedia looked into the financial crisis's impact on small businesses after a decade, they found out that business creation has not yet returned to pre-crisis levels. 

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Topics: Be Do Have, Cash Flow, Construction Marketing, Business Plan For Your Construction Company, Contractor, Contractor Tips, finance, Construction Business After COVID-19

The Number One Thing You Need To Know About Your Construction Business

Posted by Sharie DeHart on Fri, Jan 03, 2020

When you own a small construction business, it's vital you understand how money flows into and out of it. At a basic level, you need to know where your income comes from and what your expenses are. At a deeper level, knowing how money moves through your business can help you make strategic decisions about growth, invoicing, and debt management. 
 
The consequences of not understanding money can be drastic—poor financial management is one of the main reasons businesses fail. That's why you need to understand cash flow. 
 
What is cash flow?

[Starting Cash + Cash In - Cash Out] = Cash Flow

Before you can start to understand your cash flow, you need to know what cash flow is. Cash flow refers to the movement of money into and out of your business. It's fundamentally understanding how much money is coming into your business (your income, loans, and transfers of personal funds into the company) versus how much is leaving (your expenses, taxes, and loan payments). 

 
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Topics: Construction Cash Flow, Cash Flow, QuickBooks Do-It-Yourself construction Bookkeeping, Contractor, Contractor Tips, Contractor Operating Tips, Construction Systems And Processes

Unique High-Profit Contractors Count All Their Income

Posted by Sharie DeHart on Fri, May 12, 2017


The Ripple Effect Of Not Counting All Your Income Happens When You Go To The Bank For A Loan

You need to be able to show the bank that you have enough sales to pay back the loan. For most contractors, an excessive amount of profit is NOT an issue.

There are always more than enough expenses that happen naturally in your Construction Company. And there are always tools that need to be purchased, repaired or replaced.

As 2017 tax season is finishing, I have heard from owners and employees who say. This Income or That Income doesn’t count. The fact is it all Counts.

The underground economy may be there but don’t count on the information being a secret. Between Memberships, rewards cards and using a credit card purchases are being tracked everywhere by somebody. (Some contractors think buying a truck for cash is not traceable).

Play it straight, report all of your construction company income and if your QuickBooks setup is done right and the bookkeeping entries are clean more often than not you may get a big fat tax refund!

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Topics: Contractor Bookkeeping Services, Cash Flow, zLien

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