![]() ![]() Then you’ll know the best billing strategy to use so you can comfortably cover your expenses each month. You can do this for individual construction jobs as well as your whole company. This is why it is important to look at how your construction projects are billed and how expenses come in – a cash flow projection. If this is the case, you need to know how much to save to cover the expenses that come later in the project.įor example, if you bill your customers one-third of the contract every month, but you incur one-half of your expenses in the first month, you will find that the income from that job may not cover your expenses for that month. Sometimes you bill in one month and incur expenses in a different month. In construction, however, with its multiple contract and billing structures, there isn’t always a direct link between income and expenses for a certain time period. Both show the difference between your income and expenses. It can be easy to confuse cash flow and profit. You can also use this data to see how much your sales will have to increase to cover this or any added expense. For example, if you decide to buy a new truck, you can add that to your cash flow projection each month and see how it affects the bottom line for the next six months to a year. The second reason to create a cash flow projection is that it allows you to estimate the effects of a change to your business. Or, if you discover that the summer months are particularly profitable, you can get a sense of how much you need to set aside to save for the slow times. If you know that your project sales always drop in December and January, you can make strategic moves to counter that tendency. First, it helps you predict cash shortfalls or surpluses in the coming months. There are two really good reasons to perform a cash flow projection – also called a forecast – for your construction company. The real value to contractors: More cash in your pocketĬash flow projection for contractors: Predicting the future.Cash flow projection for contractors: Predicting the future.Past reports are good to keep around because they can help you spot trends and predict future report amounts. When the period is in the future, the report is called a cash flow projection. A cash flow statement is an analysis of all the cash that came in and went out for a given period (usually one month). It shows how much money you actually have on hand at a certain point in time. Understanding how cash moves through your business throughout the year is critical to success.Ĭash flow is essentially your business’s wallet. Cash flow can be a significant problem for construction companies. ![]() In turn, this can help your construction business grow and show you when a problem is coming on the horizon. An accurate cash flow projection gives you the knowledge to better predict your cash needs months in advance. Cash flow is valuable information for all business owners, especially for construction businesses. Where your construction company’s money comes from, and where it goes is called cash flow. ![]()
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