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Stop Bleeding Cash!

Chris Thomas’s No-Nonsense Guide to Construction Cash Flow

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You finished that gorgeous kitchen remodel, your clients are thrilled, but your bank account’s singing the blues. Sound familiar? You’re not alone. Welcome to the ‘where did all my money go?’ club. Let’s talk about construction cash flow accounting.

Hi, I’m Chris Thomas, and I’ve spent years wrangling the financial chaos that comes with running a construction business. Think of me as your financial cat-herder, keeping those dollar bills in line.

In construction cash flow, precise accounting and financial planning isn’t just a suggestion; it’s your lifeline. Mess it up, and you’re staring down project delays, supplier headaches, and sleepless nights.

The Construction Cash Flow Gauntlet: Understanding the Unique Challenges

Let’s face it, construction cash flow finances are nothing but cats running amok. You’re dealing with moving targets, unpredictable costs, and clients who sometimes seem to think payment schedules are merely suggestions.

First, there’s the “Percentage Completion” Puzzle. You’re halfway through a project, but your client’s only paid for 30%. That gap? That’s the percentage completion puzzle, and it can seriously mess with your cash flow. It’s like trying to fill a bucket with holes. You’re losing money every minute.

Then there’s the “Retainage Riddle”. Ah, retainage. That lovely little chunk of change they hold onto ‘just in case.’ It’s like a financial hostage situation, and you need a strategy to deal with it. Clients holding onto retainage? Think of it as them renting your money, and they are late on the rent.

This is why you need a construction cash flow accountant for retainage management.  We’ll help you strategically construct terms to keep your clients happy and your construction cash flowing.

And don’t even get me started on Job Costing Nightmares. If you’re guessing at job costs or using outdated models, you’re basically playing financial roulette.

(admittedly, roulette is my favorite game in Vegas).

Bottom Line: you need to know where every dollar goes, or you’ll bleed cash faster than a punctured tire.

Upside down construction cash flow is no joke. You need to know how to improve construction job costing accuracy.

Layout of bills and calculator to depict construction cash flow accounting.
  1. Implement a Robust Cash Flow Forecasting System: Think of a construction cash flow forecast as your financial crystal ball. It tells you when money’s coming in and when it’s going out, so you’re not caught off guard. Trying to manage construction finances without a plan is like trying to build a house with no blueprints. It’s going to be a mess. I can help you select the best construction accounting software for cash flow to help you stay on top of this.  If cost is an issue, I can help you set up manual systems that are fairly easy to handle, depending on your business size.
  2. Negotiate Favorable Payment Terms: Don’t be afraid to ask for upfront payments or milestone-based billing. Every dollar you get sooner is a dollar you can put to work.  Upfront payments aka deposits should reflect a reasonable part of your up front materials costs.  If any of those materials are custom, 100% of that cost should be in the deposit.  Deposits and milestone billings are customary in most project-based businesses, so do your homework (with my help!) to get those numbers to keep your cash flow in line with reality.
  3. Optimize Your Working Capital: Working capital is your financial buffer. The bigger it is, the more wiggle room you have to negotiate contracts and terms. Don’t let it shrink to nothing. Think of it as your emergency fund, only for your business. For long-term health of your business this step is essential. Did that sound like gibberish or climbing Mt. Everest to you? Investing in help with these very real issues is worth it to have someone help you manage these complicated steps. That is where I come in.

The Power of a Construction Cash Flow Accountant: Why You Need a Pro in Your Corner

A great construction accountant isn’t just a number cruncher; they’re your financial strategist. They can help you spot potential cash flow and job cost problems before they become disasters. We understand the unique challenges of the construction industry, including construction accounting for lien laws, and dealing with banks to get your draws timely. We keep our eyes on the numbers so your eyes can focus on building your business.

At Herding Cats Accounting, we specialize in helping construction businesses like yours get their finances in order. We’ll help you tame the chaos and keep your cash flow flowing. We offer construction project accounting services that are tailored to your unique needs.  PLUS, we are part of your team.  We delve into the details and keep everything well-managed so you have peace of mind.  No more sleepless nights!

Ready to stop bleeding cash and start building a more profitable business? Let’s chat. Contact us today for a free consultation. We can help you get the right construction accountant for your small business needs.

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stop bleeding cash: image of construction cash flow

Conclusion

Take Control of Your Cash Flow Destiny!

Cash flow isn’t something that just happens. You need to take control and make it work for you!  Herd your cash flow into a nice tight wad of cash to build your business into the future and eventually your retirement!! With the right strategies and a little help from your financial herders, you can build a thriving construction business that’s as solid as the foundations you build.

Remember, you’re not alone in this. We’re here to help you herd those financial cats and build a business you can be proud of.

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