The construction industry has the worst-known cash flow issues compared to many other industries. A start-up business, for anyone, can be a risky and challenging time. With a construction start-up business, this risk is amplified even more.
With slow, late, partial and missed payments in the construction industry, it can be difficult for any business in construction to manage their finances, keep them healthy and stay on any cash flow problems.
Read this blog to gain more insight and learn about some of the top financial tips for start-up construction companies.
Cash Flow Problems in the Construction Industry
Issues with customer payments can often lead construction work to pause or stop altogether. This often leaves half-built construction sites and eye sores for residents, locals and passers-by. It can also cause what should have been temporary disruption to roads and public footpaths to become more permanent nuisance and disturbance.
Cash flow is the movement of money coming into a business and leaving it. Construction companies will often produce statements of their cash flow yearly, quarterly or monthly to access their current financial position.
Any business can have a positive or negative cash flow. A positive cash flow is the ideal, this means that there is more money coming into the business than expenses and spending leaving it. Construction businesses can be profitable but still have a negative cash flow. This happens when the expenses are higher than revenue, something that any business will want to avoid.
Top Tips for Start-Up Construction Companies
Read below to learn what you can do as a start-up construction company to make sure you stay on top of your finances.
Offer Construction Finance Options for Clients
Some clients that you do business with may not have the funds upfront to pay for the work that you are carrying out for them, they may also refuse to pay for everything all at once.
To please your customer, and instead of having to turn work down due to their limited funds available at any one time, it is usual and will benefit both your and your client if you offer finance options for them.
Some will want to pay a deposit and spread the cost. Credit finance is commonly offered to customers within the construction and this can be a benefit to offer your customers seeing as you are a start-up construction company.
Making a Sale With a Finance Option
You could offer standard interest-bearing credit, deferred payment, or interest-free credit to attract new customers and steer them away from going with your competition.
When you make a sale with finance your customer will have to fill out a credit application. Your finance company will make a decision on whether or not to accept the application and your customer is likely to pay a deposit.
One of the top financial tips is to make people know about you if you are a start-up. Think about the best ways to promote your start-up construction business.
Advertising can vary from sponsoring a local sports club to sending an advert in your local newspapers and don’t forget to make sure your branding and contact information is on any of your vehicles so people know who you are when you are out and about.
You could send flyers to engage local businesses or development areas. Remembering something as simple as these things could make a big difference and being more recognised could help you stay ahead of your competition, even as a start-up – do things differently and win the rewards later.
Pay Your Bills
To stay on top of your cash flow, a good habit is to pay bills as soon as they come in if you have the funds. If not, do not worry, make sure you know the end of payment terms and if possible, wait until you have more funds coming into the business before you pay off your bills. This will help you as a start-up business to work with more money and wait for more to come in before parting with it to pay your bills.
Keep On Top of Invoices
Your customers will not pay you until you have sent them their bill. If your invoices are up to date this is best for ensuring money is coming in, late or slow to invoice someone, then it could be costing you money or delaying money coming into your business. Payment reminders are something that you will need to do for you to get paid faster.
Manage Your Cash Flow
It is a good idea to manage and take a look at your cash flow, analysing your expenditure and revenue. Having a clear understanding of this can help you manage your finances with your start-up construction business. This way it will ensure that you are not spending too much, especially straight away when you will not have much in the bank due to you being a start-up.
Managing your cash flow can also help you make future predictions and better decisions for your business.
Accounting Services for Construction Companies
At LJS Accounting Services, we can provide your construction firm with our expert accountancy services so you can continue to do what you do best.
We can help take any stress away from you when it comes to handling your finances and your business accounts. We offer advice to start-up construction companies as well as well-established ones. With the constant change in the economy, it is extremely beneficial to have specialists on your side, helping you tackle and navigate the world of accountancy and taxes for your business.
LJS Accounting Services have been trusted for over a decade working with a range of clients from many different sectors, including construction. We have an in-depth understanding and knowledge of the regulations and rules linked to construction accounts.
Get in contact with us today to find out more. Our friendly and professional team will be here to answer any questions or discuss your options with our services with you further. Reach us by phone on 0151 6010000, or email us at email@example.com.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.