Money management is essential for any business, but it can be especially tricky for a new construction firm. This is because construction is notoriously expensive, and there are often many different projects at once. This can make it challenging to keep track of expenses and stay within your budget.
According to research, 20% of small firms fail within the first year, and 50% fail within the first five years. Construction companies have a more unfortunate number. Up to 60% of construction firms shut down within their first five years in the business. One of the main reasons for this is poor handling of funds.
To help boost your construction company’s success rate, here are some money management tips you can consider:
Plan and Keep Track of Your Expenses
The first step to good money management is knowing where your money is going. This means creating a budget and tracking your expenses. Try to break down your expenses into categories, such as materials, labor, equipment, and marketing. This will help you see where most of your money is being spent and make it easier to identify ways to cut costs.
For example, if you notice that you’re spending a lot on materials, you may want to see if you can get discounts from your suppliers. Or, if you’re spending a great deal on labor, you may want to consider hiring more workers. Remember that it’s important to track your fixed and variable expenses. This way, you’ll have a clear idea of how much money you need to bring in each month to cover your costs.
To help you track your expenses, you can use accounting software, such as QuickBooks or FreshBooks. These tools can automate financial tasks associated with running a business, such as preparing reports, , tracking expenses, and invoicing.
You can also hire an accountant to help you keep track of your finances. This is especially helpful if you’re not familiar with accounting or don’t have the time to track your expenses. Through efficient financial tracking, you can make better-informed business decisions.
Invest Money Wisely
This can mean a lot of things. For one, it can mean using your money to grow your business rather than simply covering day-to-day expenses. This will help you ensure that your business has the funds it needs to expand and thrive.
For example, you may want to invest in new equipment or tools to help you work more efficiently. With the right tools, you can quickly complete projects and increase your profits. Your employees will also find it easier to do their jobs, leading to higher morale and increased productivity.
Another way to invest your money wisely is to save for a rainy day. This means setting aside money each month, so you have a financial cushion in case of an emergency. This can help you avoid taking out loans or using credit cards to cover unexpected expenses.
It also makes sense to invest in your team. Trying to save money by skimping on training and development will only hurt your business in the long run. Your employees will be more productive and efficient if they have the skills and knowledge they need to do their jobs well.
So, make sure you’re investing in your team’s education and development. You can do this by offering training courses, sponsoring conferences, and other learning opportunities.
The best way to invest money back into your business is by identifying what you need and what will give you the biggest return on investment. You may want to consult with a financial advisor to get started.
Build Good Relationships With Your Suppliers
Construction firms rely on different suppliers to provide them with the materials and equipment they need to complete their projects. For example, having a reliable supplier of construction equipment and building a good relationship with them will help your firm enjoy many perks like the following:
- Get the best prices on materials and equipment
- Enjoy discounts and other perks, such as early payment discounts or free delivery
- Help you avoid delays as they’ll be more likely to prioritize your orders
- Get access to new products and services
A good supplier can even offer to finance for your requirements. Many online suppliers now offer in-house financing, making it easier to acquire the right equipment based on your needs. Enter into a long-term agreement with them, and you can be sure you’re getting the best possible prices for your materials.
One way to build strong relationships with your suppliers is to always pay your invoices on time. You should also try to order in bulk when possible. This will show your suppliers that you’re a reliable customer worth doing business with.
It also helps to be friendly and easy to work with. If your suppliers enjoy working with you, they’ll be more likely to give you the best possible service. Finally, don’t be afraid to shop around and compare prices. By doing this, you can ensure you’re getting the best deals on materials and equipment.
