Command Your Cash: 5 Ways to Better Cash Flow
As contractors have seen an unprecedented stall in normal business operations, financial managers begin to feel the incredible strain of keeping projects in motion and employees on the job site. The only way to do this is through the masterful management of cash flow and a strategic financial vision.
Because working capital is not universally well managed, typically, putting the basics in place will release the most cash. Here are five ways you can command your cash.
1: Find common ground for clearer communication - There needs to be a meeting ground where financial accountants can speak the language of the field contractors. Using a graph to show the basic concepts of the financials helps various stakeholders understand the nuances of the numbers and gives an idea of what’s happening in different aspects of the business.
2: Understand your key financial drivers using analysis - Construction companies are often surprised how much cash can be released from their daily business operations, simply through proper analysis. With better data and analytics platforms, CFOs have quickly come to see the opportunities for better financial management. To get good answers, start by asking good questions. You can find examples of insightful questions to ask your data in our Command Your Cashflow eBook.
3: Master the basics of Cash Flow - Cash flow data is likely the most important piece of information in your financial statements, however, cash flow problems are often a symptom of other operational failures. Adopting good data analytics is the first step in addressing those operational systems and helps key decision-makers penetrate the veil of better cash management.
4: Understand that your accountant and CPA cannot give you strategy guidance - Construction managers often wait for their CPA to give them a year-end report where they expect to have that “ah-ha” moment about their business success and failures. That never happens. The real value for day-to-day financial advice is accurate and accessible data that can direct higher-level decision-makers in effectively interpreting their business. That can often best be done by pulling the stories out of the data and spotting trends that help you manage the future, not the past.
5: Use your financial stories to inspire cultural change - Ultimately, storytelling drives the communication required for a full cultural transformation. This occurs when all the departments of the project understand the impacts that their choices make on the overall financial health of the business. For the first time, managers have a chance to evaluate their behaviors and how that may be affecting the overall business performance. What results is a sustainable release in working capital for other types of investments or emergency measures. Analytics give each individual manager a consistent toolkit to make better decisions.
This could be the ideal time to pivot your construction company from a legacy business model into emerging technologies like data analytics. With improved financial management through analytics, well-organized construction companies will be positioned to roar out of any economic downturn and acquire the projects and talent needed to seize opportunities for expansion in the coming years.