Protecting positive cash flow in construction
In an industry with many moving parts, there are a number of challenges that construction business leaders face on a regular basis. They include inaccurate forecasting, poor resource planning, inefficient plant utilisation and the organisation and interpretation of data. They all have an impact on project cash flow and need to be tackled early before any damage is done.
What is Construction project cash flow?
As you will be aware, construction project cash flow relates to the incoming and outgoing funds in a business over time. More money flowing into the business than coming out is a ‘positive’ cash flow. If the opposite is true, the cash flow is ‘negative’. The trick is to secure a stable and positive cash flow to cover expenses and meet projected margins.
What if your construction project cash flow is not as good as it should be?
When you’re managing a large construction business with many moving parts and multiple projects, it’s easy to overshoot your cash flow capacity. Sometimes, your business cash flow will be impacted by factors outside of your control, such as early order placement for long-lead materials. This could lead to issues with subcontractors and the supply chain, which could have a negative impact on successful project delivery. To ensure that you stay on top of your cash flow management, you need to have visibility over your operations at any point in time. Replacing Excel spreadsheets with smarter ways to record, track and report on your activities is a necessary step.
Protect your cash flow with accurate up-to-date reports
Construction companies cannot afford to prepare and produce project reports in a reactive manner. Today, data-driven decision-making using technology is necessary to identify warning signs early, analyse the situation, identify the best way to tackle it, and perform corrective actions. The alternative is like driving at night without headlights. Daily reports on construction are a must. They indicate which activities have been invoiced, carried out, and paid for, plus those that have been delayed. In construction, everything happens fast and often at the same time. Therefore, good visibility helps you identify the best actions to overcome issues and protect your cash flow.
Download the whitepaper ‘7 Ways how to maintain a positive cash flow in construction’ and get industry-proven tips for your business.
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About the author
Elliot Herdman | Elliot has over 20 years experience in the construction industry working with main contractors, subcontractors, M&E, supply and install analysing their business processes and implementing digital software solutions to improve projects, drive efficiencies and meet the growing needs of clients.