“The root of all evil in the industry is chronic non-payment for jobs,” according to the Australian Subcontractors Association in a recent article in the Fairfax papers. Nothing new maybe, but construction cash flow is something that’s on everyone’s mind at the best of times. Non-payment is maybe the worst case, but it’s not just that, what about late payment? Non-payment and cash payment have the biggest impacts when it comes to causing construction cash flow headaches for a large construction company or a custom home builder. Learning how to manage cash flow will help set you up for long-term success.
“We’ve come out of a period where there has been so much workaround. Good systems didn’t necessarily come into play then because the next job was always around the corner” the article reads. Good systems are easier to run when you have good software, which has helped most industries achieve massive gains in productivity and risk reduction.
Construction management software can help avoid negative cash flow
Construction management software is designed to simplify your residential construction business. Tracking construction cash flow is important and every construction company, big and small, does it in order to be successful and stay in business. It automates and connects all the parts of your business — like estimating, job management and accounting — allowing you to be more efficient and profitable.
Construction management software is key to growing your business. Tracking your business expenses is important to make sure the current cash flow is healthy, meaning more money is coming into the business than going out. Negative cash flow can hold you back from making decisions that fuel growth. Sometimes, especially for custom home builders, negative cash flows are the result of late payments from customers on construction projects. It’s important to know when more money is expected into the business, to inform decisions that help keep it running. A construction business with cash flow problems usually struggles to stand out from the competition, so getting software to help you keep track of the finances will go a long way in setting you up for success.
Benefits of construction management software
If you’ve used or are still using Microsoft Excel, paper plans, calculator, and ruler to create takeoffs and estimates, there’s a better way. You can start reducing the unnecessary stress of managing multiple jobs or not knowing if you’re making money. Always know if you will have money coming in to continue driving your business forward.
Save time and frustration by using a construction management software solution that centralizes manual, inefficient processes into a single automated platform.
An integrated, Cloud-based system saves you flicking between spreadsheets and manually inputting data into multiple systems can lead to mistakes. Sometimes, these mistakes can lead to losing money, which is never a good thing for a small business owner.
Stop wasting time checking different places to get the needed information.
For builders and trades in construction, having an integrated solution for estimating, job management, timesheets and accounting will cover 90% of what most companies need. Builders can save hours by making better software choices.
Some things to consider:
- Look for technologies that sync with other systems. Tools and software websites should have a list of apps, tools and technologies they integrate with
- Ensure your tech is Cloud-based for easy data backups
- Search for new tech designed for construction as they will have a better chance of integrating with your other programs.
- Look for mobile-friendly programs
- Check for a wide range of functionality such as costing, quoting, scheduling, etc.
- Find technologies that capture as many of your data sets as possible, such as client details, employee details, invoices, etc.
Remember: more technology does not equal better technology. Having fewer (but smarter) integrated tools is more efficient.
3 things you can do now
1. Use good accounting software (Cloud)
We see that the most successful custom home builders and trades on our platform use a modern, cloud-based accounting software such as Xero, MYOB or Quickbooks Online. Being online (or “Cloud”) you benefit from being able to invite your Accountant or Bookkeeper to work on your accounts and access your information from anywhere, so you can keep you on track.
2. Track your jobs like a boss
Staying on top of jobs as they happen is the key to good cash flow management to be a successful company. You need to right tools to do that. Job by job, you need a real-time view of what’s going out, and how that stacks up against what’s coming in. Construction Job Management software like ours means you know exactly at your fingertips. With all your purchasing and invoicing done with one tool, and everything neatly transferred to your accounting software at the click of a button, you’ll be on your way to managing cash flow like a pro.
3. Familiarize yourself with safe harbor provision
Company directors in the construction industry should familiarize themselves with safe harbor provisions, which allow directors to attempt a business turnaround while being protected against personal liability for insolvent trading. “Safe harbor is really an insurance policy towards insolvent trading, but it’s something people don’t really like to talk about,” Andrew Spring from Jirsch Sutherland Insolvency Solutions says.
We’re on a mission to help builders and trades thrive, so talk to us about how you can use mobile and cloud-based tools to drive your business forward.