Financial Red Flags Your Construction Company Can't Afford To Ignore
Posted by Sharie DeHart on Fri, Jun 27, 2025
Topics: Systems And Processes, Systems, Financing Secrets Revealed, finance, Improve Construction Cash Flow, Financial Statement, Cash Vs. Profit
Cash Is King, But Do You Have A Crown? Why Cash Flow Trumps Profit
Posted by Sharie DeHart on Fri, Jun 20, 2025
As a construction accountant, I've seen it time and again: a small construction company can look wildly successful on paper, reporting healthy profits year after year, yet consistently struggle to pay bills, make payroll, or invest in new equipment. How can this be? The answer lies in a fundamental truth often overlooked in our industry: Cash is King, and profit, while necessary, is usually just a loyal subject, not the reigning monarch.
You can have a profitable project that leaves you cash-strapped, and conversely, a company with lower reported profits might have a healthier bank account. This distinction is paramount, especially for small construction business owners in the U.S., where long project cycles, retainage, and fluctuating expenses can create a perilous gap between what you've earned and what you've on hand.
We often emphasize this critical difference, highlighting that understanding and managing your cash flow is more vital for survival and growth than simply reviewing your profit and loss statement.
Let's dissect why cash truly rules the construction kingdom and how you, as a small business owner, can ensure your crown jewels are liquid and accessible.
The Fundamental Truth: Profit is Theory, Cash is Reality
Imagine you just completed a multi-phase residential renovation with a fantastic 20% profit margin. The client is thrilled, and your P&L looks great. However, if your contract stipulates a 10% retainage held for 90 days after project completion, and you have fronted significant material costs and subcontractor payments early on, your bank account could be dangerously low. You've made a profit, but you don't have the cash to take on the next big job, pay off a critical supplier, or even meet your next payroll.
Topics: Small Construction Company, Cash Flow, Systems And Processes, Systems, Improve Construction Cash Flow, Cash Vs. Profit, Cash Trumps Profit
The Cash Flow Survival Guide For Your Construction Business
Posted by Sharie DeHart on Fri, Aug 16, 2024
Avoiding cash flow crises is crucial for the success and sustainability of your construction business. Managing cash flow is vital for small business owners. Poor cash flow management can create significant challenges even if your business is profitable.
Cash is a fact; Profit is an opinion
A cash crisis can be emotionally devastating and even kill your business. If you've ever had to beg, borrow, and steal to cover tomorrow's payroll, you know what I mean.
Understanding cash flow
Cash flow refers to the money moving in and out of your business. Cash inflows come from sales, interest earned, and investments. Cash outflows cover rent, payroll, bills, and supplier payments. Positive cash flow means your inflows exceed outflows, while negative cash flow indicates more money going out than coming in.
Topics: QuickBooks Contractors Financial Reports, cash report, Cash Flow, Construction Bookkeeping And Accounting, Contractor Cash Flow Problems, Increase Cash Flow, Improve Construction Cash Flow
Navigating Construction Cash Flow Challenges, Myths, And Facts
Posted by Sharie DeHart on Fri, Apr 26, 2024
In the world of small businesses, positive cash flow is king. The driving force keeps your business engine running smoothly, covering all your liabilities. But what happens when outflow exceeds inflow? Cash flow problems ensue, threatening the survival and growth of your construction business.
These cash flow problems can originate from various sources, including macroeconomic issues like recessions, natural disasters, wars, and microeconomic problems like business decisions and performance. However, careful planning and smart accounting practices can cushion or even avoid these financial blows.
Managing cash flow is a vital part of running a successful construction business. Some contractors think managing cash flow means tracking how much money enters and leaves their business, but more goes into it.
Topics: Cash Flow, Contractor Cash Flow Problems, Increase Cash Flow, Construction Forecast, Contractor Guidance, Improve Construction Cash Flow
Better Practices For Managing And Maintaining Your Business Cash Flow
Posted by Sharie DeHart on Fri, Sep 29, 2023
Topics: Cash Flow, Bookkeeping, Contractor Cash Flow Problems, QuickBooks Construction Accounting, Improve Construction Cash Flow
How To Increase Your Construction Business Profit In Three Months
Posted by Sharie DeHart on Fri, May 19, 2023
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.
Topics: Construction Cash Flow, Cash Flow, Construction Accountant Who Listens, Contractor Cash Flow Problems, Contractor Tips, Improve Construction Cash Flow
Seven Tips To Help Your Construction Business Adjust For Inflation
Posted by Sharie DeHart on Fri, Jan 27, 2023
This can lead to operating at a loss - spending more money than you make. Otherwise, you will eventually run out of cash reserves and be out of business. And while it's not uncommon, especially for new companies, it's still not ideal and shouldn't continue in the long term.
Topics: Construction Bookkeeping And Accounting, Contractor Tips, Improve Construction Cash Flow, Boost Construction Profitability, Inflation, Construction Business Inflation
The Advantages of Paperless Payroll In Your Construction Company
Posted by Sharie DeHart on Fri, Jan 13, 2023
You won't find a contractor using inefficient tools on the job site these days. The hammer or the nail gun? No question. While every contractor recognizes the flaws of using ineffective tools, they may still be losing money due to inefficient payroll tools and processes.
As with most things, payroll is going digital – for a good reason. There are many benefits to digital payroll for construction business owners and staff alike. Read on to learn why switching to paperless payroll could be right for you.
Topics: Construction Cash Flow, Construction Bookkeeping And Accounting, Key Performance Indicators, Contractor Tips, Improve Construction Cash Flow, Boost Construction Profitability
Topics: Construction Cash Flow, Construction Bookkeeping And Accounting, Key Performance Indicators, Contractor Tips, Improve Construction Cash Flow, Boost Construction Profitability