Saturday, February 28, 2015

Are YOU a Victim of “Cash Crunch?”


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Are YOU a Victim of “Cash Crunch?”

As a business owner, you usually have many hats you have to wear.

On top of that, you've got a couple of dozen ‘urgent’ priorities dragging you away from what needs to be done.

With so much going on, being pulled in so many different directions, it is difficult to focus on what is most important to your business.

However, a word of caution …

Whatever situation your construction business is in now.

It is usually NOT just one ‘thing’ that is holding you back.

Instead there is a whole bunch of little things that conveniently slip under your radar.
On their own, they may not grab your attention.

Add them up all together and it is a different problem.

You see …

They feed off of each other.

They even have the ability to run a muck in what appears to be a healthy company, slowly, ever so slowly, making it sick and sicker.

Let me ask you a question.

Have you ever found yourself desperate for cash?

You might realize it after you've paid your bills, maybe not all of them, and found not enough left to pay you?

If that is the case, you’re suffering a ‘cash crunch.’

Cash crunches are the result of those pesky ‘little things’ that slipped under your radar.
It happens when you’re not paying attention to your business metrics.

The next thing you know, you’re caught short and … in a ‘cash crunch.’

Let me dig a little deeper..

Cash flow is the lifeblood of your construction business.

Without it, you find yourself shackle to an 800 pound Gorilla. Not nice.

With poor cash flow you find yourself …

>>>Wondering where all the money went.

>>> STRUGGLING to pay your bills.

>>> Robbing Peter to pay Paul.

>>> Doing without for yourself and your family so you can try and keep the business alive.

Or even worse …

Not paying all your bills including Uncle Sam!

Seriously, put some thought into this. Aren't you missing something?

I can tell you the answer is a resounding YES!

What this boils down to is NOT understanding your business metrics.

As I said earlier, cash flow is the lifeblood of your business.


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With that thought in mind, here are some metrics you need to know.

ACC – Account collection cycle. Basically, how long does it take you to get paid on your receivables?

CCC- Contract to cash conversion. How long from the time you start the work until you get paid the last dollar owed to you.

Working capital. The amount of money available to you after you've paid your liabilities.

Capital Reserve. The amount of capital you need to have available to you in order to pay your bills according to your ACC.

And that’s just for starters.

I usually find that these other following items impact cash flow.

Pricing model. The amount you markup your work to arrive at a selling price.

Leakage. What you are unnecessarily expending with no return for its loss.

Seepage. What you freely give away to get the work.

Haltering. Taking on too much in Sales without the capital funding or the resources to support it.

So if you find yourself at the end of a month, good or bad in revenue, still scratching your head wondering where the money went …

You have a serious cash crunch problem, and … you need help NOW!


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