So how would I advise somebody to control cash in a construction business? That's a good question. I would probably look at four key areas starting with 

Project Profitability

All cash flow into your construction business starts with how profitable your projects are. It seems a pretty obvious suggestion, but it is critical to get it right. So review your project costing templates and processes. Understand how you are pricing up those projects and make sure that you're pricing them accurately and with the best possible margins in place. 

Progress Claims

Understand how your construction projects will run. That means getting clear that the objective is to run cash-positive projects, and that involves dealing with contract terms, progress claims, and schedules in the contract that understand not only what the project's profitability looks like but also what it looks like from a cash perspective.

So, you need to model that out and understand what your cash flow will look like on an individual project. You need to have the guts to negotiate with customers and fight for the cash flow your business needs. 

Handle Retentions Creatively

A lot of people just sit there and take retentions, whatever's put forward in the contract, and sometimes you're stuck with that. Sometimes you are. And that's a fact of life, but not always. There are ways and means of being creative with retentions and making sure that that a) you minimize them and b) that you manage them and handle them effectively. 

Credit Control

It is absolutely critical to get your credit control right. Whether it's through trade credit insurance or strict credit policies, ensure that your business is protected against non-payment. Regularly review your credit control processes and ensure your team is vigilant in following them. The tighter your credit control, the more secure your cash flow will be.

I can't emphasize enough how critical that is in a construction business, particularly with where the construction industry is at right at the moment. It's never been more important. 

In conclusion, the 4 key areas I would suggest you look at when managing cash in construction are:

  1. Ensure your projects are priced for profitability from the start.
  2. Get clear on progress claims and contractual terms early in the project.
  3. Be proactive and creative in managing retentions.
  4. Maintain strict credit control to protect your cash flow.

Partnering with Quantum Advisory allows you to focus on what you do best – running your business – while leaving the financial aspects in capable hands. Contact us today to experience the benefits of working with Quantum Advisory.