Managing cash flows is an important consideration for any business. Construction companies in particular need to manage cash flows to ensure that all elements of a construction project run smoothly.
Jobsite ANZ spoke with Chris Strode, the Founder of Invoice2go, a mobile platform that assists businesses with invoicing and expense-tracking, about some top tips for general managers to control cash flow, and about why managing cash flows is so important for the construction industry in the first place.
Tracking Cash at all Times
Monitoring the cash flow of a business is important to keep track of expenses. It ensures that enough money is flowing in at regular intervals in order to support the business. Studying cash flows over the course of each year can help construction managers identify and plan for major expenses.
“Analysing slow periods can help guide you when it comes to planning major expenses, ordering more inventory, and scheduling in larger projects,” says Strode.
Managing cash flows allows general managers to identify the busiest period for their business and prioritise earning as much as possible on major projects.
“Fixed costs will be there all year round, so the more money you can put away during bigger paying projects, the better."
“Fixed costs will be there all year round, so the more money you can put away during bigger paying projects, the better. Putting money away while you’re at your busiest will put your construction business in the best position possible, and it will help you not to fall victim to seasonality,” Strode notes.
Building an emergency fund with three to six months’ worth of expenses can help insulate businesses during slow periods and can allow one to keep up with rent, utilities and other payments.
“While this does take time, you’ll be grateful when business slows and you still have reserves to see you through,” says Strode.
Cash Flow Applications in Construction
Enough cash is needed to support construction businesses should any unexpected expenses come along. Having to hire new contractors for projects, needing to replace equipment, and buying materials out of pocket are all significant expenses that can hit construction companies at any time.
Sometimes, clients might delay payments. That’s why it is crucial businesses keep a close eye on cash flows to ensure their business can run successfully during ‘down’ periods.
“Cash flow is the lifeblood of any construction business. Without it, you’ll be hard-pressed to function,” says Strode.
Sometimes, clients might delay payments. That’s why it is crucial businesses keep a close eye on cash flows to ensure their business can run successfully during ‘down’ periods in business.
“Cash flow can suffer due to any number of things, but one thing that can make it all-the-more unpredictable is waiting on payments from slow clients,” says Strode.
How Technology Can Improve Cash Flow Management
Invoice2go is a mobile and web application that assists businesses in managing expenses, invoices, and general operations. Small construction companies can use Invoice2go to help speed up payment processes and manage their more difficult cash flows.
“Small businesses tend to be the last to get paid, especially when the invoice is quite a large sum as it often is for construction businesses. This hurts cash flow and can put you in a sticky situation during slow periods,” says Strode.
“Not only does the app help you capture expenses to make tax-time easier, it can help you send invoices on the spot to speed up the payment process."
Using Invoice2go can provide construction companies with an easier method for payments, helping businesses to get paid faster. Construction businesses can use the app to track due dates, set payment reminders, and in particular, provide consumers with multiple forms of payment.
“Not only does the app help you capture expenses to make tax-time easier, it can help you send invoices on the spot to speed up the payment process,” notes Strode.
“Giving them the option to pay with whatever suits them—anything from debit to credit card to digital wallets like Apple Pay—means there will be more incentive to be paid sooner and have a more consistent cash flow to keep you on track year-round,” he adds.