5 Common Financial Mistakes Small Building Businesses Make

1/1/2023

Having your own construction firm comes with its own financial risks. From managing job costs to ensuring a smooth cash flow, the very nature of the industry can guide one down the wrong path of fiscal mistakes. Orchestra-HQ knows how to help construction companies escape these mistakes using tailored financial options. We will unveil five financial errors small construction businesses tend to make—and how to avoid them.

1. Unsound Cash Flow Management

The Problem: Cash flow is business lifeblood, yet construction companies often face overdue payments, unexpected expenses, or slowdowns seasonally. Absent a specific plan, those issues can very quickly turn into financial trouble.

The Solution: Implement cash flow forecasting to forecast gaps and budget for costs. Prioritize on-time invoicing and pursue late payments. Tools like QuickBooks Online can help you streamline your cash flow management, giving you a clearer picture of your finances.

2. Lack of Job Cost Tracking

The Problem: Most construction firms fail to track job costs effectively, leading to underbidding, over-expenditure, and reduced profitability.

The Solution: Use project-based accounting to charge for labor, materials, and overhead costs on a per-job basis. Not only does this keep you in line financially but also offers accurate pricing for future jobs. Programs like Procore or industry programs can make this simpler and even provide real-time data.

3. Forgetting Overhead Costs

The Problem: Indirect costs of the job usually steal the show, while overhead expenses like office rent, power, and admin salaries are mostly overlooked. This can end up in underbidding and loss of profit.

The Solution: Regularly calculate your overhead costs and apply them to your bid jobs. This keeps your price levels on par with actual business cost and helps you retain good profit margins.

4. Poor Financial Reporting

The Problem: Without transparent financial reports, it's almost impossible to make well-informed decisions or identify issues early on before they turn into major problems.

The Solution: Invest in professional bookkeeping services to give you accurate, timely financial reports. The reports must include profit and loss statements, balance sheets, and cash flow statements. At Orchestra-HQ, we provide complete financial reporting to help you keep a finger on the pulse of your business performance.

5. Not Seeking Professional Help

The Problem: Many small construction companies try to control their finances through the company itself, often with little expertise to do so. This can lead to errors, inefficiencies, and missed business opportunities.

The Solution: Partner with accounting experts who understand the unique problems of your industry. Outsourcing CFO guidance, bookkeeping, and administrative tasks can free up your time to grow your business. At Orchestra-HQ, we offer tailored solutions to meet your specific needs.

Conclusion

Avoiding these common financial mistakes can make a significant difference in the success of your construction business. By taking proactive steps to manage cash flow, track job costs, and invest in professional support, you’ll be well on your way to achieving long-term financial health and operational efficiency.

At Orchestra-HQ, we are here for you to guide you through the intricacies of construction finance. Whether you require bookkeeping, CFO advisory, or administrative help, we have you covered. Contact us today to discover how we can make your business succeed.