BUSINESS SUPPORT CASH FLOW
The success or failure of your business depends a lot on how healthy your cash flow is
FIND YOUR FLOW
D id you know that close to 4,400 construction businesses went insolvent in 2023? That’s the highest number in a decade and it outstrips many other sectors. With rising costs of materials, fuel and energy, delays to projects and skills shortages, and the ongoing issue of late payments, it’s no wonder that small builders struggle. It’s essential, then, that builders have a strong cash flow in their business. “Cash flow is very different from profit,” says Laura Chalkley, director and consultant at bookkeeping and management accountancy firm Chalkley Easterbee. “It’s about the timing of money coming in and going out. “If the timing is wrong, you might not be able to pay your bills and your business could fail because you haven’t got cash to keep everything ticking over – even though you have many projects lined up.” The first part of managing cash flow is to get cash into the business faster than it goes out, Chalkley explains. Here’s her
advice on how builders can strategise their cash flow: ● Plan your pricing to get money in when you need it and before you need to pay your suppliers. ● Ensure all of your work and purchases are covered by a contract that protects you even if variations happen (be sure to record it all in writing). ● Stick to the budget and set up your project so they are ideally self-funding – so your stage payments for jobs are frequent rather than waiting long periods for payment.
“Stage payments can be tied to reaching certain milestones or project stages rather than the old application process for work done that day,” Chalkley advises. “Doing it this way means you might be able to get the money in, or at least a deposit, before you undertake a stage of the project. So the project funds itself as you have money in before needing to pay suppliers.”
Cash flow fundamentals Be honest about where you are.
Monitoring your bank balance is a good starting point, but it doesn’t give you the
Master Builder 20
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