COVID-19 caught most industries off guard, especially construction. While Stage 3 may look like a return to ‘normal’, we should see a second wave if expert forecasts are correct. There is no time like the present to prepare for a future state of emergencies by digitizing operations and vigilantly monitoring and maximizing cash flows for the long haul.
Digitization for construction companies
Job sites will remain very different for the foreseeable future, which means social distancing, mandatory mask-wearing, fewer meetings and workers on site. Collaborative software is necessary to ensure work continues and is completed on schedule. If you haven’t yet, be sure you are:
- Using cloud-based tools to monitor inventory, equipment, employee activity, payroll and other documentation, etc. when face to face interaction is impossible
- Conduction necessary site inspections using virtual job site visit platforms or meeting software such as Skype, Zoom and even FaceTime
- Keeping your financial partners in the loop, such as your accountant, investors, and bankers, using cloud-based accounting software such as QuickBooks Online
At first, any technology change can cause frustration for workers. The first step is to determine who will be the most affected by the change and train them. Instead of making everything digital all at once, choose which will be the most beneficial for your company, assure it is implemented correctly, and let employees see the benefit before adding anything else.
Explain to your staff why you are digitizing: for their safety, increased efficiency, and to better position yourself for any future state of emergencies by having more cohesive tools and teams in place.
Maximizing cash flow for construction companies
Anytime there is a significant shift to revenues and expenses, it is no longer “best practice” to monitor cash flow like a hawk; it is imperative.
Prepare a 6-8 week cash flow forecast schedule that emphasizes cash in and outflows by client/job. This will help you see which jobs require more focus, which will offer you the most liquidity while helping you gauge which will be most profitable vs. causing more short term cash flow harm than good.
Delays cost money. When creating your schedule show potential cost increases. There is no historical data to predict how much costs will increase; the below prices could rise:
- Direct labor costs could be higher as workers are not as productive or available due to social distancing
- Material costs have increased since they are more difficult to acquire due to work stoppages
- Overhead costs are more since projects are taking longer to complete
- Health, sanitization products and gear are newly added fees
- Think about how bids on projects will be affected by the above numbers
Actions to increase cash flows may include:
- Selling unused or under-utilized assets
- Consider renting equipment vs purchasing for short term projects
- Collecting accounts receivable faster by accepting online payments or offering early payment discounts to your customers
- Negotiating extended payment terms on accounts payable with suppliers and loan holders
- Applying for government loans and support programs
- Reducing expenses by improving operational efficiency through the use of technology
- Taking a critical look at your company overheads to identify and eliminate unnecessary expenses
Our team can help you project your cash flow, manage your operating budget, and implement cash management strategies. If you would like to receive financial consulting services for your construction company or if you have any questions, do not hesitate to contact us at email@example.com.