If you are like most construction business owners, you have struggled with cash flow. Anxieties arise in your entire being and can cause both physical and emotional pain. Even mild cases of anxiety can cause an unsettling feeling in your entire body, that can affect your business’s productivity.
We are going to outline some of the major causes of financial anxiety in the construction business and provide solutions. If you plan to grow and expand your business, you may want to address or implement these before you do so.
Causes of Financial Anxiety
No matter the size of your construction business, you have most likely come across the following financial anxieties:
- Not knowing the exact costs of each project
- Being surprised when the costs per each project come in
- Not knowing in advance if you will be able to make payments on time
- Not knowing exactly how much profit you will make from each project
- Not knowing insurance costs until you are audited
- Not knowing your annual earnings or losses until you file taxes
- The constant fear of wondering whether you will have to sell or buy a job when negotiating price is on the table
- Estimating labor rates
- Estimating what markup to use
- Not knowing which projects will make a profit and which will cost you
These are just a few of the many anxieties that construction business owners face everyday. Although some of your anxieties may have not made this list, the solutions below will help make a very positive impact on your construction business’s finances.
How to Eliminate Financial Anxiety
1. Implement a Financial System For Your Business
A wide variety of the financial anxieties listed above can be solved by creating a financial system for your business.
What is a financial system?
This can be anything from a document or program that is used to track your incoming and outgoing finances. It can also help you predict overhead and direct costs and markup and labor rates. Most construction business owners track these numbers using a spreadsheet, but there are many advanced systems that can make this process simple.
2. Utilize Construction Factoring
Construction factoring can benefit your business in many ways. With construction factoring, a factoring company will step in and purchase your business’s outstanding invoices to give you an up to 96% cash advance in just 24 hours or less.
Construction factoring will allow you to get almost immediate cash for your work so you can:
- Manage payroll
- Secure a strong source of capital
- Confidently bid on jobs
- Stock up inventory
- Purchase materials for large jobs, and more
3. Predict and Track Use of Workers Compensation
Just like you will track your finances, you will also need to track your employees. Keep a separate spreadsheet that keeps records of your employee’s hours, jobs, and workers compensation exposure. This will help you better predict what expenses you will need to pay, rather than being blindsided when completing your taxes.
Don’t let financial anxieties take control of your business and your health. We hope that by utilizing these tips, you will be able to better control your finances and your anxiety, so that you can get back to doing what you love.