How do I improve my cash flow?
Cash flow problems usually aren’t about making money. They’re about timing. You can be profitable on paper but still scramble to cover payroll because customers pay slow and your bills are due now.
Start with invoicing. Send invoices the day work is complete, not a week later when you get around to it. Every day you wait is another day before the payment clock starts. If you bill on the 15th instead of the 1st, you’ve pushed your payment out two weeks for no reason.
Require deposits upfront. For contractors and service businesses, asking for 30 to 50 percent before starting work brings cash in before you spend it on labor and materials. Progress billing throughout a project keeps cash flowing instead of waiting until the end to bill everything at once.
Follow up on receivables. Most late payments aren’t customers refusing to pay. They’re customers who forgot or lost the invoice. A friendly reminder at 7 days past due, another at 14, and a phone call at 30 gets most payments without damaging relationships. Track your accounts receivable aging weekly so nothing slips through.
On the outflow side, don’t pay bills early unless you’re getting a discount. If a vendor gives you 30-day terms, use them. Paying on day 5 when you could pay on day 28 ties up cash you might need. Review your accounts payable to see where you can negotiate better terms with suppliers.
Build visibility into your cash position. Knowing you were profitable last month doesn’t help when you’re short on cash today. A simple 4-week or 8-week cash forecast showing expected inflows and outflows lets you see problems coming before they hit. This is something any small business bookkeeper in American Fork can help you set up.
Separate profit from cash flow in your thinking. You can be profitable and still run out of cash if your customers pay in 60 days but your expenses are due in 30. Understanding this timing gap is the first step to managing it.
Build a cash reserve when times are good. One month of operating expenses in a separate account creates breathing room. You stop making decisions based on this week’s bank balance and start making them based on what’s actually best for the business.
Consider a line of credit before you need one. Banks lend money when you don’t need it, not when you’re desperate. Having an unused line of credit gives you a safety net for slow periods or unexpected expenses without the panic of trying to secure financing in a crunch.
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More Questions
How do I account for change orders in my books?
Record change orders as separate line items from your original contract, tracking both the additional revenue and the associated costs. This keeps your job costing accurate so you can see true profitability on the original scope.
Read answerHow do I track costs for each construction project?
Assign every expense to a specific job at the time it happens using cost codes that match how you estimate. Track labor, materials, and subcontractor costs separately by phase, then compare budget to actual weekly.
Read answerWhat reports show job-level profitability?
The key reports are Job Profitability Summary, Job Profitability Detail, and Profit & Loss by Job. These show revenue minus all costs assigned to each project so you can see which jobs actually made money.
Read answerHow do I track equipment hours by job?
Use daily equipment logs or telematics systems to record hours by job. Then calculate an hourly equipment rate that includes ownership and operating costs, and apply those hours to each job in your cost reports.
Read answerWhat expenses should a paving contractor track?
Track materials, equipment, labor, subcontractors, and job-specific costs. More importantly, track them by project so you know which jobs actually made money and which ones ate your margin.
Read answerHow do I handle retainage in my bookkeeping?
Track retainage separately from regular receivables using a dedicated retainage receivable account. Record the full revenue when you bill but split the receivable between what you can collect now and what's being held back.
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