Every business experiences slow periods when the market for their goods or services lessens and sales drop. Construction business owners like you might be tempted to view downtimes as unproductive or wasted, but there are ways you can make the most of your business during these seasons.
Here are five ways to ensure this time isn't wasted:
1. Take a good look at your business
When things are busy, it gets easy to fall into a habit of taking care of day-to-day tasks and forgetting your overall business picture. However, slower times are an excellent opportunity to step back from the daily grind and ask yourself if your business is still moving towards its goals, what opportunities or challenges are on the horizon, and whether it's time to try something new.
Nobody wants their business to fail. Although it's impossible to predict the future with 100% accuracy, a cash flow forecast is a tool that will help you prepare for different possible scenarios in the future.
What is Cash Flow Forecast?
Cash flow forecasting is the process of estimating how much cash you'll have and ensuring you have a sufficient amount to meet your obligations. By focusing on the revenue you expect to generate and the expenses you need to pay, cash flow forecasting can help you better manage your working capital and plan for various positive or challenging scenarios.
A cash flow forecast comprises three key elements: beginning cash balance, cash inflows (e.g., cash sales, receivables collections), and cash outflows (e.g., expenses for utilities, rent, loan payments, payroll).Read More
Every small construction business owner knows how challenging it is to cut down expenses without somehow compromising internal or external quality. Regardless of your business's nature, the first step to reducing your overhead costs is to take the time to go through every single expense you have. Next, assess which ones are necessary for your business to operate smoothly, what can be trimmed down, and what can be eliminated.
It's important not to rest on your laurels. Continually thinking of ways to reduce your overheads is essential for a healthy cash flow, so conducting regular reviews of your business expenses should be a routine task.
A wise business owner once said, "Happiness is positive cash flow." As a business owner, I'm sure you agree. Everything is better when your cash-in exceeds your cash-out.
A cash crisis can be emotionally devastating, and it can even kill your business. If you've ever had to beg, borrow, and steal to cover tomorrow's payroll, you know what I mean.
Having a proper cash management system allows you to:
- Know when, where, and how your cash needs will occur.
- Know what the best sources are for meeting your additional cash needs.
- Be prepared to meet these needs when they occur by keeping good relationships with bankers and other creditors.
The starting point for avoiding a cash crisis is allowing your accountant to develop a cash flow projection for you. Your construction accountant can help you develop both short-term (weekly, monthly) cash flow projections, help you manage daily cash, and long-term (annual, 3-5 year) cash flow projections to help you develop the necessary capital strategy to meet your business needs.Read More
Cash flow is the lifeblood of any construction company and especially the ones with annual sales volume under $1,000,000. Some construction Company experts even say that a healthy cash flow is more important than your contracting company's ability to complete projects! While that might seem counterintuitive, consider this: if you fail to satisfy a customer and lose that customer, you can always work harder to please the next customer. If you do not have enough cash reserves to pay your suppliers, creditors, and make payroll, then your Construction Company is out of business, game over!