Running a construction business is more complex than making sure cash is coming in and bills are being paid, unfortunately.
While a solid foundation of cashflow is a big piece of the puzzle, to keep your construction business growing at a steady pace you’ll have to balance your finances with both efficient operations and sound planning to take steps forward.
There are many ways to make sure you’re stable and ready for growth. From creating seamless processes to budgeting tips, we’ve got best practices for balancing your business finances.
4 Tips to Better Construction Business Finances
- Make large purchases wisely
Every business needs to invest in a major purchase from time to time for their business. If you are in need of a new vehicle, more space for storage or warehousing, or a large piece of equipment, it’s an investment for your company.
Take a look through your company’s financial habits and history over several months or years. You may be able to pinpoint a pattern, showing you a good time to make such a purchase.
Calculate how soon you’ll have a return on your investment, based on the cost of the item or project compared with the revenue it will bring in.
Get more than one quote for the project or items to help you ballpark the cost. And make sure you’re aware of one-time fees, maintenance costs, delivery and shipping charges, and even training time.
Once you’ve laid out a plan, you can think about how to finance the effort – buying outright, leasing, getting a loan or using a line of credit.
A large purchase needs to be approached with care, but can make a big difference to your business.
- Improve accounting
Working through all the day-to-day details of running your construction business can be time-consuming and complicated. You need to track sales, invoices going out, cash coming in, bills you need to pay, the status of your accounts, payroll and benefits costs, and more.
Working with software designed for construction businesses can help automate much of that, creating more time for you to do other things.
Working with an accounting firm such as Gift CPAs can help you set up all the right items in your system. An experienced accountant can help you determine what you should be focusing on and help you set up the right reports to review on a regular basis so you’ll have a snapshot of your financial state at any given time, and will be able to more easily sort income and expenses.
- Create a solid bookkeeping routine
Making sure you’re tracking and updating your systems and records regularly, either yourself or through an outsourced bookkeeper, can reduce the headaches that arise if these details get overlooked, even for short periods of time. Set aside time to: send invoices, review bank statements, pay bills, review project profitability, and keep a close eye on cash flow. Keeping a detailed check register will help track these details.
If you use a point-of-sale system as well, turning those logs and records into your accountant can help streamline their time as well.
Completing bookkeeping tasks using a consistent process, with time set aside to review your financials and track the upkeep will help organize your operations immensely. This will also help you manage your cash flow and track expenses and simplify the process of paying your subcontractors or general contractors. Using an outsourced bookkeeper model lets you stay current on the financial tracking and details without having to invest your time in the day-to-day finance activities. This approach lets you continue to do the work you enjoy and excel at, without having to sacrifice business management best practices.
- Managing employee expenses
Whether it is covering the cost of fuel for fleet trucks, or enabling your site supervisor to buy the handful of wire nuts needed to finish the job when the site runs out, having employees means you’ll have expenses, and it’s important to manage their business-related expenditures.
We recommend creating an Accountable Expense Reimbursement Plan that complies with IRS regulations on what qualifies for business expense reimbursement.
As part of such a plan, you’ll create a transparent policy to manage employee expenses whether they use a company credit card or request reimbursement of their own spending. You’ll outline what expenses qualify for reimbursement, what does not qualify, the approval process before making a business-related purchase, and how to file an expense report.
If you would like help with setting up a thorough process, Gift CPAs is happy to work with you on the details!