Money Management Tips for Your Contracting Business

In order to run a successful business, you have to keep an eye on your money. This is particularly true in the first few years, if you have to do your own accounting. There are lots of reasons to hire a professional to handle your bills and income, but it’s still wise to keep your own tabs on it. Here are a few money management tips to make your business run more smoothly.

Watch Your Cash Flow
When you handle your personal expenses, you probably wait until you have income before you pay the bills. But what happens when you have more bills to pay than income to handle it? What do you do when you have a lot of money that comes out at one time, while the income slowly trickles in? Keeping an eye on your cash flow helps to ensure that you have the money to pay the bills when they come due. This also helps you to avoid having to make tough decisions, like determining whether to pay yourself or pay the rent on your workspace.

Beware of Excessive Overhead
Overhead is a term used to describe the bills you have to pay from the revenue that you bring in. If you have a lot of bills to pay, cash flow may be a bigger problem for you. A lot of people working in construction need to pay for:

  • Labor
  • Equipment rentals
  • Supplies
  • Workspace
  • Services

You may have to make some decisions about whether or not to buy or rent equipment, or how much inventory of supplies you keep on hand. Keeping this in balance gives you more flexibility with your income.

Minimize Debt Load
It’s hard to run a business without incurring any debt, particularly if you did not have a significant amount of savings to start with. However, running up a lot of debt can increase your overhead. If you have to choose between paying credit cards or a line of credit on the equipment and supply purchases and paying the people who work for you, you will be in a very difficult position. Be strategic about your choices to get into debt for the business. Sometimes, it may be unavoidable. At other times, there may be alternatives that make more sense, like delaying a purchase.

Don’t Forget to Invoice
When you are traditionally employed with a regular boss, you don’t have to worry too much about when you’re going to get paid. You just wait until payday and get your money. As a business owner, you have to ensure that you receive payment for services. And while this may seem obvious, it can be more difficult than you think. When you agree to a contract for a business or a private property owner, you may need to bill them throughout the project and at the conclusion. Then you have to wait for payment according to the stipulations of your contract. If you forget to invoice, you may end up waiting longer for the money.

Pay Bills on Time
Many construction fields require you to have a decent setup of equipment and supplies before you can start to offer services. This means that you may have bills before you have reliable income in which to pay them. Write down all of your expenses or use an accounting program that helps you keep track of them. Ensure that each of your bills can be paid on time whenever they are due. This will help you to avoid late fees, which can make it more difficult to manage your cash flow.

Money management is just one more way you can set yourself up to be a great licensed contractor. Passing the exam is the first part. To discover the benefits of expert exam preparation, contact CSLS today!

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