Several contractors have told me lately they are having serious cash flow issues, often having to borrow money to pay bills.
Here is a list, not in order, of mistakes that can be made in your business that will cause cash flow problems.
- Not charging enough for the work you do
- Poor payment schedules on your contracts
- Too many employees for the volume of jobs produced
- Employees paid more than they are worth
- Jobs not estimated correctly
- Jobs running over budget, especially on labor and materials
- Not holding subcontractors and/or suppliers to their quotes for jobs
- Not getting subcontractor and/or supplier quotes before estimating the job
- Jobs not getting built on schedule
- Allowing accounts receivable on completed jobs
There are other problems that can cause a cash flow crunch, but these are the most common, and can almost always be fixed if the owner will step up and change their business practices before it is too late.