Creating predictability in your cash flow as a contractor starts with taking a look at your bigger financial picture. There are three key areas to focus on: revenues, timing the receipt of payments for projects, and forecasting expenses.
Step 1:
Start with revenues. Estimate the amount of revenue your business should generate from each project you have currently slated on your calendar for each quarter.
Step 2:
Next, look at when you expect the payments for those projects to arrive. This is where accurate scheduling becomes important. It’s much easier to work around a cash flow gap on future projects if you have firm dates for receiving payment for the ones you’re currently working on.
Step 3:
The third piece of the puzzle is expenses. This includes everything you need to complete the project: materials, labor, overhead costs and everything in-between. Take note of the cost of each expense and the timeline for paying each one.
Getting clarity on the numbers can help you shape a strategy for closing cash flow gaps.
Contributed by Samantha Novick, a content marketing writer covering business and finance at Funding Circle.
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