All construction contractors have experienced bad debt's financial pain, which is defined as a customer who refuses to pay no matter what you do.

We've been there before, and it will probably happen again in the future. Owning and operating any business, including accounting, means sometimes you provide goods and services and not get paid.

Knowing The Answers Helps

"If you know the answers, the questions will not bother you" - Randalism.

When you sat for an exam or a school test and knew the material forwards and backward, it was fast and easy. The exams and tests for the classes you struggled with were the opposite.

In your construction company, it is the same; you need the answers to develop understanding, which helps us all let go of the past and move forward.

We are all currently experiencing and adapting to present pandemic times. We've probably adjusted our business model to cater to our clients, new and existing. Construction business change is almost always a good thing, but often poor management means that the workforce becomes disengaged and the change process painful. In the worst cases, this results in irreparable damage being done.

It doesn't need to be this way. Follow these steps and empower yourself to lead your contractors through significant organizational change successfully.

1. Understand the change

Make sure you understand precisely what is changing and how it affects your people. Speak to whomever you need to ascertain this properly. You need to know what the impact is on your people and the jobs they do. 

Educating yourself will mean you're better equipped to communicate with your staff. It will give them confidence that you are the right person to lead them into the unknown. It will also relieve their anxieties, as they will trust you to keep them informed and look after their individual and collective interests.

Still Doing Your Payroll?

Most construction business owners who use accounting software quickly master the basics. They automate processes like invoicing and payroll, track expenses, and view real-time financial reports to manage cash flow and make better business decisions. 

What three reports do you need for your construction business?

#1 Cash On Hand - This report shows you how much cash you have in your checking accounts, savings accounts, payroll accounts, hip national bank (your wallet), and petty cash box in your office. 

#2 Cash Coming In - This report shows you how much cash your customers and clients owe you and how much of it will be likely to receive in the next 30-60-90 days.

#3 Cash Going Out - This report shows you how much cash you owe yourself, suppliers, employees, and the taxman and how much of it will be likely to pay out in the next 30-60-90 days.

For construction business owners, working with independent contractors can be a lifesaver. Although, hiring Independent Contractors can get very expensive, very fast!

The Internal Revenue has a defined set of rules on the difference between an "Independent Contractor" and "Employee." With all the documentation in place, a person could still be classified in the eyes of the Internal Revenue Service as an "Employee."

When you hire 1099 contractors

You need to know that their state contractor's license, bond, and insurance are active. During audits, state agencies are now looking to check the bond and insurance. Anytime a contractor's license is suspended, the State may reclassify that person as an employee on your job.

Nobody wants their business to fail. Although it's impossible to predict the future with 100% accuracy, a cash flow forecast is a tool that will help you prepare for different possible scenarios in the future. 

What is Cash Flow Forecast?

Cash flow forecasting is the process of estimating how much cash you'll have and ensuring you have a sufficient amount to meet your obligations. By focusing on the revenue you expect to generate and the expenses you need to pay, cash flow forecasting can help you better manage your working capital and plan for various positive or challenging scenarios.

A cash flow forecast comprises three key elements: beginning cash balance, cash inflows (e.g., cash sales, receivables collections), and cash outflows (e.g., expenses for utilities, rent, loan payments, payroll).

Making decisions never ends for contractors like you. Being adaptable is one of the basics of good decision-making skills.

Think of decision-making as being in a bumper car. You are continually driving and trying to avoid the other bumper cars. Suppose you hit one you back up and go again (reminder this is the only safe place to hit other vehicles). The rest of the time, life as a contractor feels more like the Indy 500. You are driving as fast as you can, passing other cars, making pit stops, and scrambling to make it to the finish line.

Translate this to a typical daily life of a construction contractor:

• The paperwork, processes, and decision-making are never-ending
• The concept of time is all about 10 minutes
• Your coffee brews in less than 10 minutes
• Take a shower in less than 10 minutes
• Load the dishwasher in 10 minutes
• Take out the trash in less than 5 minutes
• Read your email in less than 5 minutes
• Decide what bills to pay in less than 5 minutes
  

As a construction business owner, you operate in a multi-faceted changing environment doing the impossible with limited time, money, and resources on every project, and soon as one is finished, another one is waiting for you. You are highly skilled, intelligent, and adaptable.

You press a few keys on your keyboard thinking you are going to get the results you want, accurate bank balances, a report showing who owes you money and whom you owe money to, a Profit and Loss Report and Balance Sheet Report you can understand and if all goes well perhaps even some Job Costing Reports.

Instead, what you get is a hot steaming pile of fertilizer that cannot even be used in the garden. Many contractors like you feel like hiring a Professional Contractor Bookkeeping Service is a waste of money when you should do it yourself. That is often what leads good contractors like you into The Vicious Construction Company Failure Cycle.

If there's one thing last year taught us, it's how quickly the world has changed in such a short time and that we cannot take anything for granted. While we can all hope that the pandemic is a once-in-a-lifetime scenario, there is a lot in life and in business that is uncertain, and there is a great deal we can learn from the response to COVID-19 to help plan for the future.

Yes, your construction company might have changed drastically in recent months. There is good news in that, too. It means your business is adaptable and that you can find ways to survive.

Every small construction business owner knows how challenging it is to cut down expenses without somehow compromising internal or external quality. Regardless of your business's nature, the first step to reducing your overhead costs is to take the time to go through every single expense you have. Next, assess which ones are necessary for your business to operate smoothly, what can be trimmed down, and what can be eliminated.

It's important not to rest on your laurels. Continually thinking of ways to reduce your overheads is essential for a healthy cash flow, so conducting regular reviews of your business expenses should be a routine task.