When your contracting business starts to experience cash flow issues that limit your productivity and cut into your profitability, it’s a cause for alarm. When these issues progress to the point where you’re breaching your contractual obligations, it’s time to get a handle on your cash flow struggles immediately, before they threaten to dismantle your business for good.
In part one of this three-part series, the Denver contractor attorneys at Cotney Construction Law discussed why cash flow issues are so dangerous, especially for small business owners. Additionally, we detailed some reasons why borrowing money early can prevent you from trapping yourself between a rock and a hard place financially. Now, we will continue to provide cash flow solutions for contractors who want to prevent their business from facing financial collapse as a result of lackluster money management.
You might be surprised to find that many contractors dealing with cash flow issues have no shortage of work. While these contractors have no problem obtaining and executing contracts, they fail to focus on the accounting side of their business, which opens them up to a slew of cash flow issues. Part of the reason these businesses have cash flow issues can be attributed to the use of antiquated procedures for monitoring the money coming in and out of their business.
New advances in technology, such AI-enabled solutions that focus primarily on helping contractors visualize their cash flow, can assist contractors with balancing their incoming and outgoing funds. Integrating this technology into your company’s overall business strategy can shed light on other internal issues. Identifying and addressing these issues can help usher your business into the next phase of growth.
Don’t Be Afraid to Second-Guess Yourself
Contractors who rely solely on their instincts to succeed may find themselves behind the pack when it comes to managing their cash flow. You should be periodically reviewing your cost structure to identify inefficiencies and potential cost savings. For example, assessing the makeup of your workforce — full-time employees, part-time, temporary workers, etc. — can help you restructure your workforce to maximize productivity while reducing costs. Some other costs you should check regularly include shipping costs, overtime pay, overdue invoices, equipment rentals, material storage, and more.
When it comes to your cash flow, there’s no shame in second guessing the way your business is spending money. You want to make sure you’re getting the best possible price for every facet of a project and protecting your bottom line. Even if you aren’t experiencing cash flow issues, you might be surprised to find that you could be earning significantly more than what you’re already taking home at the end of the day.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.