Many businesses struggle to stay on top of their spending, especially in challenging economic environments when cost and profit are hard to predict.
Following months of high prices for gas and essential goods and issues with the supply chain, more than 47,000 UK businesses are in critical financial distress. A third of these companies on the brink of collapse are in the property and construction industries, two of the UK’s strongest sectors.
While it is hard to remain solvent in times of economic difficulty, there are steps you can take to safeguard your company against money trouble. Follow this guide to managing the finances of your construction business so you can survive where others fail.
Make a budget
The first step to effectively managing your finances is to make a budget. Being aware of how much money you have to play with is the only way to ensure you stay in the black.
Your budget should include an itemised list of all of your outgoings from paving slabs used for outdoor landscaping to essential equipment and tools. Try to track this monthly or at the very least quarterly so that you can assess your trends in spending.
Balance these costs against profit predictions, being conservative with your estimates to avoid overspending.
Utilise software
Let’s face it: there’s plenty of opportunity for human error when it comes to managing money, even if you get a professional accountant to look at your books. Utilising software helps to eliminate this potential problem while also making it quicker and easier to update your financial information.
Look into specialised software tools designed to help construction companies with financial management. Once you’ve input the key information, you can calculate your costs and a real-time profit at the click of a button.
The software is also a great way to stay on track with complicated financial obligations such as tax.
Optimise cash flow
One of the best ways to make sure that your profit stays steady is by optimising cash flow. This is achieved by taking steps to get prompt payments so that your earnings exceed your outgoings.
Asking for payment upfront is a popular method for businesses offering a service such as construction companies. This gives you the cash to buy the parts and products needed to do the job and to pay your staff immediately upon completion.
If you do decide to take post-payments instead, make sure to invoice early. It’s also a good idea to have the facilities to accept card payments and bank transfers as well as cash and cheques. This is an instantaneous guarantee, and most people and companies rely on digital payments these days.
Run regular reports
Finally, remember to run regular reports. Whether business is booming or you’re in a dry spell, it’s vital to understand the reality of your financial situation and take measures to safeguard your finances.
When you’re enjoying a period of success, you can use your reports to work out how much money you can reasonably save for the future. During challenging times, your reports will reveal opportunities for cutting costs to bolster your earnings without damaging your operations.
