Even during successful times, construction businesses should undertake a fiscal and operational cleansing. This lays the foundation for more robust operations and frequently yields several surprises; often in the form of increased cash flow.
Here are 7 areas for construction firms to focus on: -
Investigate prospective and current clients.
Not every job or client is lucrative. Don’t retain unprofitable clients and before signing a new client, scrutinise their finances and credit rating through a credit agency.
Assess your organisation’s insurance and payroll levels.
If these are amongst your organisation’s largest expenses, doesn’t it make sense to ensure that you’re not paying more than necessary?
Approximate jobs accurately and precisely.
Ensure that your project timeline is realistic; that you’ve included the necessary labour/material requirements and that you have factored in your subcontractors’ and suppliers’ costs.
Don’t reinvent the bidding process wheel.
By developing an efficient bidding process, you’ll cut your time in half and double your odds of securing the business. Seek only projects in your area of expertise that you’re a good chance of winning.
Analyse and adjust projects accordingly.
Scheduling and managing project backlogs properly is essential to increasing cashflow.
Evaluate project managers’ performance and provide incentives.
Provide incentives for project managers to complete jobs on time and within budget.
Build a foundation of good accounting practices.
Thoughtful planning and engaging the professional counsel of a Chartered Accountant with construction industry expertise and diligence in implementing and following-up on these strategies will propel your business towards economic prosperity.