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.
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.
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.
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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