Most construction companies go through slow periods.
Sometimes, those periods are apparent. A seasonal trade business,
for example, will have decreased income during the off-season than
during the on-season.
There can be less obvious peaks and valleys in your income,
though you have to prepare for it.
Your cash flow forecast can help you monitor your day-to-day
cash flow and anticipate when times will be slow before they hit.
By predicting when the cash coming into your business might be
light—or when you might have to spend more than you're accustomed
to—you can avoid a cash crisis.
By examining your cash flow over the previous years and
forecasting your future cash flow, you can better anticipate
financial cycles and how they affect your bottom line.
They help plan for tougher
It's tempting to spend money when you have a lot coming in.
Your construction business may need new equipment, or maybe you
want to give all your employees a raise or a bonus.
That's a great thing to do, but it's only helpful if it
doesn't jeopardize your business financially.
Cash flow forecasting is an excellent reminder about how your
bank accounts will look during tougher times, so you can make
important decisions about when to spend your money and when to save
If you know a slow period is coming up, it might be better to
save your money for now and give out smaller bonuses. If you can
anticipate your slow period, you can plan major purchases and bill
payments to stretch your cash further.
At least by conducting cash flow forecasts, you're less likely
to be surprised by a sudden cash-flow crisis.
They show banks you can
Banks prefer to give their money to entrepreneurs who show
they are capable of planning. Financial institutions prefer
business owners who are realistic with their financial projections
and show they have a means of addressing cash flow
Forecasting your cash flow gives you a clearer picture overall
about your construction business and how the money moves into and
out of it. It provides essential insight into your company's
If you haven't conducted cash flow forecasting so far, it's
good to get started now, so you have a better understanding of your
company's finances and prepare for the future.
Want help to improve your cash-flow? Contact us today.