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September 21, 2016

Getting Strategic About Cash Flow in Construction


While every business needs cash to operate, the construction industry approaches cash management a bit differently from other brick-and-mortar institutions. Determining the best tactic for purchasing equipment or training project managers to become more adept at cash management are just a few areas wherein construction firms should adopt a strategic approach to optimizing cash flow.

One of the more obvious ways in which managing cash in construction differs from other industries is due to the fact that builders operate on two distinct levels: the company’s overall cash flow and the cash flow tied directly to individual projects. It’s important to understand the latter, as each construction job is expected to function as an individual profit center just as the entire company is expected to be profitable. For instance, one project may be successfully funding itself, while another is underperforming and absorbing funds from more profitable jobs.

That’s why robust project management software is so important: it provides the visual dashboard construction companies need to understand critical aspects of cash flow, such as cash received on a project to the outflow of money used to satisfy accounts payable and payroll.  While it’s no surprise that a firm understanding of money coming in and going out is important, diving deep into cash flow trends also informs construction project teams as to which types of projects are profitable and which ones stagnate.

In addition to understanding the nuances of projects and profitability, there are also numerous ways construction companies can increase their positive cash flow with the help of proper planning and technology tools. Some of these examples are similar to how a family budget might be run, such as shopping for the best price from suppliers and financing larger purchases to keep cash on hand (albeit with the penalty of paying interest). The right project management software tools can allow accounting departments to adopt automated invoice processing and accept electronic payments. Finally, a robust construction project management platform will incorporate cash flow projection features to aid in planning for future expenses and also in identifying the company’s most robust profit centers.

With proper planning and project management tools, construction companies can have a sufficient amount of cash on hand and ensure they are pursuing work that drives maximum revenue. To find out which solutions United Solutions can provide to enhance your cash flow strategy, contact us today for a product demonstration.


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