Keys To A Better Year: Three Ways to Make Your Money Work For You
Construction often has thin margins.
That’s just an unfortunate reality of the business.
Because of this, one of the keys to maximizing profitability is figuring out how to make your money work for you.
Unfortunately, there is no easy, one-size-fits-all solution to this: What ‘making your money work for you’ will actually look like depends on your particular financial situation, as well as the terms you have with both your GCs and suppliers.
The key, however, is taking the time to actually examine your options so that you can determine the best way to move forward. In doing so, the following are several factors to keep in mind:
- Be strategic about purchasing.
Do you have certain materials that you end up needing on every job? Do you have good credit terms with your suppliers? Would you be able to negotiate better prices with your suppliers if you could buy in bulk and/or pay for materials sooner?
Look at your options on this.
If you have good cash flow, and you can save 25% by buying in bulk, it might make sense to go ahead and pony up for some extra piping that you know you’ll be using down the road. If you have a Net90 job, and your supplier will give you a 10% discount for paying within 30 days, getting a factor to pay for those materials early could save you money. If you know the job is running behind, it might be a good idea to wait a few more weeks before ordering readily available materials.
Your best option is going to vary from job to job, and supplier to supplier, but taking the time to evaluate your options is a good way to save some money.
2. Evaluate how you keep track of expenses.
Having a console full of receipts in your truck is not always the best way to keep track of your spending.
If you can keep track of your expenses in one central location, and in a format that makes it easy to check and compare, you’ll be in a better position to make sure that things aren’t falling through the cracks. Just as importantly, this will make it easier to look for patterns or mistakes. By catching over-billing, and noticing trends to how you spend, you’ll free up valuable money that can be spent on other things.
3. Use credit to your advantage.
Do you qualify for a business-rewards card? Don’t be afraid to put materials on a card that you’ll pay off every month.
Will suppliers give you 90 day terms with no interest? Take advantage of that!
Will using a factor or bank LOC allow you to leverage discounts with your suppliers? Look into those options!
Credit is a bit like fire: If you abuse it, the results can be catastrophic. But, used wisely, it can be one of the biggest keys to growing your company.
Unfortunately, as I mentioned above, this is one of those areas where there is no easy solution. The same approach that saves you money on one job will cost you money on another, so the key is sitting down and taking the time to evaluate your options. Doing so is rarely a fun task, but a little effort can provide a huge boost to thin margins.