Blog Layout

Three tips for managing construction industry cashflow

YMS Bookkeeping Services, Inc. • November 10, 2022

Owning a small business in the construction industry can be incredibly stressful. In addition to the long days and difficult working conditions, you have to 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 for managing your cash flow if you own a small business in the construction industry.

1. Be aggressive in following up on invoices

Small businesses in the construction industry 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 encourage clients who were considering not paying you to reconsider. Reach out to clients if necessary to discuss payment options. 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 clients then attempt 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 small business owners become self-employed because they have construction skills, not because they want to be businessmen. The financial aspects of running a construction business are complex, and take a great deal of time and planning. That can add a lot of responsibility to the business owner.

Hiring someone 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 someone on your side who has the financial expertise can assess your business, advise you about your cash flow and help you secure funding is invaluable. It will be worth it in the long run with the time and money you’ll save.

Final thoughts

Most small business owners face cash flow issues at some point in their career. Unfortunately, those in the construction industry 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 business.

A woman is sitting at a desk in front of a laptop computer.
By YMS Bookkeeping Services, Inc. January 15, 2025
When you run your small business, you have a lot on your plate. That makes it tempting to let some tasks slide, especially tasks that are related to finances, which can be challenging and often outside your preferred skill set or experience. Here are some financial best practices for managing your business, so you can … Continued
A woman is sitting at a desk in front of two computer monitors.
By YMS Bookkeeping Services, Inc. January 8, 2025
Running a small business is a constant juggle, and one of the more frustrating tasks is managing your receivables. How often have you found yourself waiting on overdue invoices, wondering if you’ll have enough cash flow to cover next month’s expenses? If this sounds familiar, you’re not alone. Many small business owners struggle with keeping … Continued
A person is holding a piece of paper next to a stack of papers.
By YMS Bookkeeping Services, Inc. October 14, 2024
In the fast-paced world of construction, general contractors juggle numerous tasks—from managing projects and coordinating with subcontractors to ensuring client satisfaction. Amidst these responsibilities, financial management often takes a backseat, leading to potential pitfalls. This is where a bookkeeper becomes an invaluable asset. Here’s why having a dedicated bookkeeper is crucial for a general contractor: … Continued
A pencil is sitting on top of a graph on a piece of paper.
By YMS Bookkeeping Services, Inc. September 11, 2024
Managing cash flow is crucial for small business owners. Even if your business is profitable, poor cash flow management can create significant challenges. In this guide, we’ll share practical tips to help you avoid a cash flow crisis and ensure your business remains financially healthy. Understanding cash flow Cash flow refers to the money moving … Continued
A pen is sitting on top of a piece of paper with numbers on it.
By YMS Bookkeeping Services, Inc. August 14, 2024
When you run your small business, you have a lot on your plate. That makes it tempting to let some tasks slide, especially tasks that are related to finances, which can be challenging and often outside your preferred skill set or experience. Here are some financial best practices for managing your business, so you can … Continued
An annual tax prep checklist is sitting on a table next to a cell phone and a magnifying glass.
By YMS Bookkeeping Services, Inc. August 1, 2024
Running a business is hard enough without having to wrestle with out-of-date accounting records. That’s where cloud accounting comes in—a modern solution that can make your life a whole lot easier. This article explores why small businesses should embrace cloud accounting and how it can drive your success. What is Cloud Accounting? Cloud accounting involves … Continued
A person is holding a pen over a pile of coins while using a calculator.
By YMS Bookkeeping Services, Inc. July 19, 2024
Starting a business without a plan is like setting sail without a compass. While you might eventually reach your destination, the journey will likely be longer and more challenging. A well-constructed business plan is essential for guiding your business towards success.  Here’s why: It Clarifies Your Vision A business plan helps you articulate the vision … Continued
A woman is sitting at a desk talking on a cell phone.
By YMS Bookkeeping Services, Inc. July 17, 2024
As a business owner, you’ll need to stay informed about your finances and your financial situation. You do this through bookkeeping. Bookkeeping is the process of recording transactions in your business. This includes any transactions, credit card charges and any other financial activity that happens within your company. How good bookkeeping helps you Bookkeeping is … Continued
A notebook is sitting next to a laptop on a table.
By YMS Bookkeeping Services, Inc. May 31, 2024
Financial models are invaluable tools designed to help you understand and project the financial health of your business. By simulating different scenarios and examining potential outcomes based on various inputs like sales growth, margins, and cash flow, these models provide a comprehensive picture that aids in informed decision-making. Practical steps for leveraging financial models: 1. … Continued
A notebook with a pen and coins on a wooden table.
By YMS Bookkeeping Services, Inc. May 1, 2024
If you’re a contractor, it can be challenging to manage a hectic schedule and complex projects, all while ensuring your paperwork, documents, and contracts are in order. It’s important to keep a paper trail of your work and practice due diligence. Keeping all your working documents in order shows that you treat your business, customers, … Continued
More Posts
Share by: