Working Numbers Blog

Cash is what keeps your business alive. It is like the air we breathe – you can’t live without it!   It’s possible to increase cash flow if you use these business strategies.

Try these strategies to increase your cash flow in your construction business:

1. Reduce your spending

The first step to implementing this strategy is to carefully review all of your business expenses. How much do your office supplies and electrical bills cost every month? How much do you pay for insurance, employee salaries, and other bills? After analyzing your spending, look for areas that you can reduce. Are there vendors that you have a good relationship with that may offer you a discount? It’s important to consider spending cuts carefully because pay cuts can drive away good employees and independent contractors. In addition, if you try new services to save money, the quality may not be the same. And in the construction trades, your quality affects your reputation.

2. Collect payment when the job is complete

If you’re trying to encourage your customers to pay faster to increase your cash flow, make sure you discuss it with them in advance to avoid any misunderstandings. If you have sold a large construction job, collect a deposit before you begin work. A deposit will help to offset the cost of materials necessary for the job.  Before you start work, let them know that you will review the job with them upon completing work and collect payment at that time. Although there are fees involved, you should have a merchant account or other method to accept all forms of payment.  Make it easy for the customer to pay so you will have fewer unpaid invoices to collect.

3. Watch your inventory

Are you investing a large portion of your cash into inventory? Having the items you may need easily accessible in your truck or warehouse may be your preferred method, but you don’t want it to destroy your cash flow. Find a balance between having enough items in stock to satisfy customer needs and having too much.  You can use Quickbooks to create sales reports that will help you to determine which items you need in stock at all times and which can be ordered as needed. Keeping a smaller number of items in stock can free up some much-needed cash for other uses.

4. Raise your prices

Are you keeping up with inflation? Have vendors been raising their prices, but you have not raised your sale prices? You might be able to raise prices on your products and services to increase your cash flow.  Start by using job costing to identify the average percentage of profit on past projects.  Use software like Quickbooks and enlist a certified bookkeeper to find the information to determine your actual costs. The quoted amount sometimes seems like it will result in a healthy profit, but once all expenses are accounted for, the profit can become significantly less. Your bookkeeper can help you find the information you need to price correctly.

You can increase your construction business cash flow!

Try using these strategies in your business operations to discover what works best for you. 

If you don’t have the time or energy for this, contact us at Working Numbers.  We work with contractors in the construction trades to help them get their books in order so they can build a successful business.  If your construction or home services business needs help – let the experts at Working Numbers get your books organized.

We’re in business to make a difference in your business.
We’re also committed to giving back, which is why a percentage of our revenue every month goes to the G1VE, and is distributed to accredited non-profits.
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Sharon Davidson, CB, CBA

CEO and Founder of Working Numbers