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Boosting Your Contracting Business’s Cash Flow

There are a few things that are applicable to virtually all businesses, and one of these is a desire to maximize cash flow. Companies with low cash flow will not be able to survive in the long run, making it naturally important across virtually every industry out there – including the contracting world.

At Contractors School, we offer numerous contracting business management services to varying clients, including everything from business qualifiers and license upgrades to continuing education programs and more. What exactly is cash flow, why is it important for contracting businesses, and what are some simple ways to improve your cash flow? Let’s have a look.

What is Cash Flow?

For those just learning about this important term, cash flow refers to the amount of cash and cash equivalents that move in and out of a business over a particular period of time. Cash and cash equivalents are items such as money in the bank, investments, and accounts receivable.

Why is Cash Flow Important?

Cash flow is important for businesses because it provides them with the ability to purchase inventory, hire personnel, make investments, pay off debtors, and more. When there is a lack of cash flow, businesses tend to struggle with all of these things – and more.

Without adequate cash flow, it can be difficult for contracting businesses to pay employees and vendors on time, as well as invest in the necessary business equipment and personnel needed to stay competitive. Therefore, it is important to prioritize maximizing cash flow whenever possible.

How can contractors go about doing this? Our next several sections will look at some simple tips.

Use Cash Flow Management Software

Luckily, today’s technology allows for the use of cash flow management software, which can help businesses keep a better track of their spending and income. This type of software will enable contractors to generate reports on cash flow and analyze them in real-time to make adjustments if is necessary.

For many contractors who are not experts in accounting and finance, cash flow software is a great tool to help them keep track of their expenses and accurately calculate their cash flow. There are several such programs to choose from – always keep in mind the features you need, the specific industry you’re in, as well as your budget.

Finance Supply Purchases

Rather than paying outright cash for purchases of supplies, equipment, or IT infrastructure, contractors should look into financing the purchase. This is a great way to spread out payments over time, helping business owners manage their cash flow without having to spend too much at once.

There is one major exception here: If a given supplier has agreed to give you a major discount for cash payment in full, you should consider taking the discount and paying upfront.

Comparison Shopping for Materials

Another important tip for contractors looking to maximize cash flow is to shop around. This will enable them to compare prices and find the best deal possible, which can help keep costs down and free up more cash flow in the long run.

Whether you are looking for materials or services, always take your time shopping around – this small effort can go a long way towards improving your cash flow.

Accept Various Forms of Payment

You also want to be sure that you’re able to receive cash in various forms. This means accepting payment via credit card, paypal, check, or any other form of payment you can think of – so long as it helps boost your cash flow.

For example, if some customers prefer to pay with a credit card but you don’t accept it, they may choose to go elsewhere and your business will suffer from the lost revenue.

Automate Your Invoices

Using the software programs we discussed above, one great tip for contractors is to automate their invoices. This will help them send out invoices at the right time and keep track of when they are paid, reducing the amount of time spent managing accounts receivables.

Furthermore, automated invoicing also allows for payment reminders so that customers don’t forget about their obligations – this alone can help increase the likelihood of getting paid in a timely manner.

Fast Change Order Processing

Change orders are a necessary part of the contracting process, but they can also be a huge drain on cash flow if not managed properly. It is important to get change orders processed quickly and accurately so that you can make the necessary adjustments in your budget or timeline.

To do this, you may want to invest in specialized software which can help streamline the change order processing process and make it easier for you to keep track of everything. Additionally, if possible, negotiate with clients to make sure that payments are made shortly after the change order is approved – this will help you maintain a better cash flow.

By following these tips, contractors can ensure that their businesses have the cash flow needed to stay competitive and profitable. From using cash flow software to automating invoices, these tips can help you maximize your cash flow and keep your business running smoothly.

For more here, or to learn about any of our contractor management, licensure or other services, speak to our team at Contractors School today.


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