Tips Checklist

Cash Flow

• Negotiate your billing terms before the contract is signed. Try to bill your clients and receive payment before your payables (bills that need to be paid) are due.
• Consider the type of billing, progress billing (% complete) generally delivers greater cash flow than most draw methods. With a time and materials contract negotiate weekly or biweekly billings rather than monthly.
• Bill your clients as soon as possible, waiting too long to bill your clients may be sending a message that you don’t really need the money.
• Review accounts receivable weekly, the older your receivables become the less likely you are to ever receive payment.
• Manage your Accounts Payable to maximize your cash flow. Schedule your accounts payable (bills that need to be paid), consider printing checks only twice a month. Take early pay discounts whenever possible; a 2% discount per month can compound to approximately 36% per year. Negotiate discounts with your vendors.
• Be aware of your cash balance (how much money you have in the bank) at all times.
• Project cash needs in advance and use lines of credit or other loans for as short of time as possible. Pay down your credit line whenever possible, if only for a few days.

Job Profitability

• Include field supervisors in the estimating process; ask employees how long tasks will take and give them feedback as project progresses.
• Prepare and use job binders for field use; including Budget, Most Recent Job Cost Reports, Contract (without dollar amount), Schedule (updated regularly), Change Orders, Daily Field Reports, Subcontracts with scope of work, Supplier and Subcontractor Contact Information.
• Review job status and costs regularly and communicate with the crew in a measurable manner.
• Use an efficient system to track subcontractor’s licenses, insurance certificates and Tax ID numbers.
• Keep and eye on project costs; review job costs weekly after processing payroll. Review in detail any areas that have higher or lower than expected costs. Review your committed costs and cost to complete monthly.
• Manage your change work; this is an area with a high risk potential. Never begin change/extra work without a signed order, or you may be doing the work for free.

Internal Control

• Construction is one of the hardest hit industries for fraud and embezzlement.
• The owner (or President) of the company should open the bank statement and check for reasonableness; this should take just a few minutes. If only this step was done many of business owners could have saved themselves major grief.
• Segregate duties when possible; the person that pays the bills should not be the person that reconciles the bank statement. Cross training employees can be a safeguard system.
• Create a positive work environment; employees frequently commit fraud against a company that they perceive treats them with injustice.
• Periodic system reviews by an outside person or company.
• Make sure financials are reconciled regularly, balance job costs to general ledger (accounting).
• Require vacations be taken by employees.
• Set the tone of business at the top; employees who view their leaders as honest & trustworthy are more inclined to copy that behavior.