General contractors, summer has a way of keeping everyone focused on what’s happening in the field.
You’re managing crews, meeting with customers, ordering materials, and trying to keep projects moving. Before you know it, fall is right around the corner.
This is one of the best times of year to stop for a few minutes and look at the financial side of your business. A few warning signs tend to show up after a busy summer and catching them now gives you time to make adjustments before the year comes to a close.
Let’s walk through seven of them.
1. Using money from new projects to cover expenses from older ones.
A customer pays a deposit on a new job, but instead of funding that project, part of the money goes toward payroll, supplier invoices, or bills that should have been covered weeks ago. This pattern usually doesn’t happen overnight. It develops little by little until every new project is helping pay for the one before it. Once that starts happening, cash flow becomes harder to manage even though the business is staying busy.
2.Ccustomers taking longer to pay.
A project may be complete, but until payment comes in, your business is still carrying the cost of that work. Payroll, rent, insurance, fuel, and vendor invoices don’t pause while you wait for a customer to send a check. The longer payments are delayed, the more pressure it puts on the rest of your business. That’s why it’s important to keep a close eye on outstanding invoices instead of assuming they’ll eventually take care of themselves.
3. Change orders that still haven’t been billed.
Construction projects change all the time. A customer adds work, upgrades materials, or asks for something that wasn’t included in the original scope.
During a busy season, it’s easy for those changes to get approved but never make it onto an invoice. Every unbilled change order represents work you’ve already completed without collecting the revenue you’ve earned.
4. Payroll becoming more stressful every month.
A growing business should create more opportunities, but it shouldn’t leave you wondering how you’re going to cover payroll every pay period. When payroll feels tighter month after month, it’s usually pointing to something bigger, whether that’s slow collections, rising job costs, or cash flow that’s falling behind the pace of your work.
5. Finishing projects with less profit than you expected.
The estimate looked solid when you submitted the bid, but labor took longer than expected, material prices increased, or subcontractor costs came in higher than planned. Looking back at estimated costs compared to actual costs after every project helps you bid for future work with better information instead of repeating the same mistakes.
6. Relying on credit cards to keep the business moving.
Using a credit card once in a while isn’t unusual. The concern is when business expenses regularly end up on a credit card because cash isn’t available when bills come due. Over time, those balances create another monthly payment that puts additional pressure on your cash flow.
7. Waiting until tax season to review your numbers.
Many contractors spend most of the year focused on jobs and only look closely at their financial reports when it’s time to file taxes. By then, every financial decision for the year has already been made.
Reviewing your numbers throughout the year gives you the opportunity to improve cash flow, strengthen profitability, and correct problems while there’s still time to do something about them.
None of these warning signs automatically mean your construction business is in trouble. They simply tell you it’s time to take a closer look at what’s happening behind the scenes before small issues become larger ones.
If you’d like a better understanding of your business finances before fall, request a Free 30-Minute Business Tax & Accounting Review. We’ll review your bookkeeping, payroll, taxes, and financial records together so you can make informed decisions for the months ahead.
