Three tips for managing construction industry cashflow

Three tips for managing construction industry cashflow


Owning a small business in the construction industry can be incredibly stressful. In addition to long days and difficult working conditions, cash flow issues can also be an ongoing concern. It can take a long time to collect on payment from your clients or contractors who hired your business, and in the meantime you have to pay employees, cover fixed expenses, buy supplies and pay your own subcontractors.

Here are three tips for managing your cash flow if you own a small business in the construction industry.

1. Persist in following up on invoices

Small businesses in the construction industry are at a risk of having their clients not pay them on time. Or at all. Being too passive in collecting on unpaid invoices or reminding clients when payment is due will not help you collect the money you need to pay your bills.

Sending out reminders of invoices that are due can not only speed up the process of getting you paid, it can encourage clients who were considering not paying you to reconsider. Reach out to clients if necessary to discuss payment options. Even a payment schedule is better than no payment at all.

The worst thing you can do is sit around and hope your client will pay you.

2. Watch for scope creep

Scope creep occurs when clients or other project stakeholders change a project’s goals or deliverables. Almost all projects experience some form of scope creep, but too many changes to a project can severely impact your bottom line, and in turn your cash flow.

Make sure the terms of your project are set out clearly and let clients know that any changes to the project will result in additional fees. If clients then attempt to change the project you can remind them about the original agreement and the additional fees. If they insist on making the changes, you are free to charge the agreed amount.

3. Consider delegating financial tasks

Many construction small business owners become self-employed because they have construction skills, not because they want to be businessmen. The financial aspects of running a construction business are complex, and take a great deal of time and planning. That can place a lot of responsibility on the business owner.

Hiring someone to take care of the financial aspects of your business, or even to advise you about the decisions you face, can remove the stress completely. It will be invaluable having someone on your side with financial expertise, who can assess your business, advise you on your cash flow and help you secure funding. Plus, your investment in a professional will be well worth it in the long run with the time and money you’ll save!

Final thoughts

Most small business owners face cash flow issues at some point in their career. Unfortunately, those in the construction industry typically have more of a difficult time managing cash flow. The large scale of the projects, the multiple stakeholders involved, and the number of factors that can go wrong on a project all increase the financial risks.

Following a few steps can greatly enhance your cash flow and make financial management in your business an easier process.

Construction Business Bookkeeping

If you want to chat more about financial planning or cash flow strategy, drop us a message so we can schedule a one-on-one consultation. Whether you’re just after some general financial advice, bookkeeping tips, or assistance selecting a software package to manage your finances, we are happy to help!

See below for our bookkeeper locations.

Our Bookkeepers

Justine Day: Southern Highlands / Bowral Bookkeeper
Petra Austing: Southern Highlands / Bowral Bookkeeper
Amanda Graham: Gold Coast Bookkeeper
Karin Evans: Gold Coast Bookkeeper
Pru Hall: Wollongong Bookkeeper
Jackie Short: Canberra Bookkeeper