Running a business means the owner may need to wear a lot of hats to keep daily operations functioning correctly. From hiring new workers to establishing a marketing strategy, business owners must spend countless hours each day ensuring the company remains profitable. This is especially true for contractors, who must rely on an array of subcontractors to assist with the completion of a job. With so many variables, it can be difficult for contractors who run a growing business to keep track of every issue to guarantee jobs are being completed and the money is rolling in.
Buried in the midst of these never-ending responsibilities is improving the business financials. Maintaining a steady and consistent cash flow is crucial to ensure operations stay up and running. Consider the following four techniques for boosting business financials:
INVEST IN NEW TECHNOLOGY
Running a business means trying to grow it into a bigger one. While streamlining operations and improving efficiencies are always key aspects of hitting new milestones to reach this goal, sometimes it’s easier said than done. Making a to-do list and regularly crossing off items can be helpful, but it’s not necessarily a surefire way to actually improve the business—especially if employees or subcontractors aren’t pulling their weight.
However, there is one method for boosting efficiencies and streamlining operations: investing in the right technology. Contractors must constantly juggle a wide variety of responsibilities, from negotiating with clients to locating and vetting the right subcontractors to going through and finalizing a project. With so many divergent tasks to keep track of, it can sometimes be difficult to keep everything in order. Utilizing a cloud-based software platform solves many of the problems associated with trying to organize so many loose ends. There are many different types of platforms available for contractors and, although they will cost the company in upfront capital, typically the return on investment is well worth the price.
Cloud-based software solutions can store all relevant information in a single repository and provide every team member real-time access to this crucial data. Whether it’s a change order, an RFI, or the vast array of invoices and receipts accruing on a project, this technological solution allows business owners to easily and intuitively keep track of important documents. Best of all, investing in a cloud-based software platform breaks down the silos that keep various departments from directly interacting with each other, most notably the accounting department. With real-time access to financial documents, expenses, and income streams, the bookkeepers for contractors can easily and immediately keep tabs on all the money coming in and going out of the company. This allows contractors to not only make better financial forecasts for the coming year, but to also stick to these plans and see them through to fruition.
TAKE ADVANTAGE OF SECTION 179
Tax deductions are one of the best ways to boost cash flow. Thankfully, the government just made one of the biggest deductions much more advantageous for businesses. Late in 2015, Congress passed the Protecting Americans from Tax Hikes bill and President Barack Obama signed it into law. The PATH bill effectively raises the monetary limit on how much a business can deduct for new purchasing, new equipment, and machinery and it makes this deduction permanent. What was once a $25,000 limit is now $500,000. This opens up the door for a host of new capital expenditures for contractors, whether it’s buying construction equipment, purchasing new cloud-based technological solutions, or even new office space for a growing business. Now that Congress has made this deduction permanent, it means contractors can make more informed decisions on long-term investments and financial forecasting.
REVIEW INVENTORY, SUPPLIERS AND CUSTOMERS
It’s important for contractors to breakdown their cash flow and segment it into more easily managed sections. Segmenting out inventory, suppliers, and customers is a good way to isolate revenue streams to ensure every penny is being spent appropriately and wisely. Reviewing inventory is a good way to make sure that too much money isn’t being tied up in materials or products that are not major profit sources. Similarly, dividing suppliers into regular and one-off categories can go a long way toward developing more strategic negotiating terms and discounts. Finally, consider checking out which customers are actually paying their invoices on time. Some of the biggest customers can sometimes be the most flagrant to miss payment deadlines. Just because a customer or client isn’t paying his or her invoices within the allotted 30 or 60 days, doesn’t mean the person should be tossed aside. Instead, establish a strategy for dealing with missed or unpaid invoices and ensure these clients know they’re still a priority.
CONSIDER ALTERNATIVE LENDERS
Maintaining a steady and consistent cash flow can be one of the hardest responsibilities for a contractor. Just because an invoice is sent out to a client immediately after rendering services doesn’t necessarily mean it will get paid on time. In addition, some vendors can be notoriously flaky with their receipts. With so many different factors needing to converge and so many obstacles that can divert payments, ensuring a business’s cash flow can be a nightmare waiting to happen. Fortunately, alternative lenders are now capable of filling this glaring hole in operations. With easy application processes, quick turnaround, and a variety of lending options to choose from, alternative lenders provide the crucial capital for contractors when they need it most. ■
About The Author: Dave Gilbert is the founder and CEO of National Funding, one of the largest private lenders of small business loans that provides equipment lease financing and growth capital to small- and medium-size businesses nationwide. For more information, visit www.nationalfunding.com.
Modern Contractor Solutions – March 2016
Did you enjoy this article?
Subscribe to the FREE Digital Edition of Modern Contractor Solutions magazine.