Cashflow is the lifeblood of business. For small businesses, cashflow is as essential as oxygen. In industries like construction, where costs can fluctuate, effective cashflow management is critical to survival.
At my business, iBuild, cashflow management is more than a financial task – it’s a key driver of our strategy, ensuring sustainable growth and informed decision-making, even amidst competition and economic uncertainty.
- Plan and project cashflow
We have taken a proactive approach to forecasting cashflow on a project-by-project basis. This helps us anticipate shortfalls before they arise. Using historical data, market trends, and cost projections for materials and labour, we review forecasts monthly. This allows us to quickly respond to fluctuations, like renegotiating terms with suppliers or clients, without compromising the business’s financial health, - Track every dollar to a cost centre
Effective cashflow management requires meticulous tracking of both income and expenditure. Digital tools like MYOB and Workbench allow us to track every transaction down to the cost centre and activity level. This detailed visibility minimises the risk of overspending and ensures better resource allocation, supporting sound financial decision-making at the project level. - Invoice promptly by milestones
Timely invoicing is crucial to maintaining cash inflow. We structure invoices around key project milestones – such as preliminary work, design, approvals, and material delivery. This spreads payments evenly throughout the project lifecycle. To help clients manage payments, we offer flexible options, including credit cards, improving customer satisfaction and mitigating payment delays for smoother cashflow. - Negotiate supplier terms
Strong supplier relationships are key to our cashflow strategy. We’ve secured favourable 30-day trade accounts with suppliers like Bunnings and Bluescope, by demonstrating our growth and reliability. These extended terms provide flexibility in managing cash outflows, aligning payments with incoming client cash, reducing the risk of cash shortages, and supporting smooth operations even during long projects. - Build a cash reserve
A robust cash reserve is essential to our financial planning. By setting aside profits from each project, we create a buffer to handle unexpected costs in materials or labour without passing them on to customers. This financial cushion aligns with our commitment to “standing strong to deliver your dream home, no matter whatever storm.” It not only boosts customer confidence but ensures we can continue delivering, regardless of market fluctuations. - Offer customer financing
To offer more flexibility for clients, we’ve partnered with financial institutions to provide “build now, pay later” options. We receive payment upfront, ensuring steady cashflow, while clients repay the institution over time. This approach reduces our financial risk and makes our services accessible to a broader customer base, strengthening our competitive position.
