Loads of Work and Still Worried About Making Payroll?
Cash flow problems can be bad for business. Even if you have a steady stream of work lined up, businesses need operating capital in order to grow, thrive and expand. More immediately, you need enough available cash on hand to manage the day-to-day activities, like making payroll, obtaining materials for your business, and restocking used inventory and supplies.
Cash Flow Problems Can Facilitate Poor Decisions
Profits and cash flow are completely different entities for businesses. Unfortunately, they are sometimes at complete odds with each other. Your business can post record profits while worrying about keeping the lights on from month-to-month, much less worrying about whether you’re going to be able to make payroll.
When you have a steady stream of work coming in and are recording profits but continue to worry about keeping things going on a daily basis, your business is experiencing cash flow problems. These problems can lead you to make decisions that are bad for your business, such as:
- Accepting jobs for lower pay than normal just to have money rolling in or deliberately quoting jobs lower to keep projects rolling in.
- Missing out on opportunities for your business because you’re too busy working on low hanging fruit.
- Hesitating to hire new staff because of cash flow concerns even though you need more people to maintain consistent quality and service for your customers.
- Reluctance to fire staff because it costs too much to replace them by retraining new staff members and employees.
- Paying late fees, interest charges, and other expenses related to lack of cash on hand.
- Slowing growth for your business because you simply can’t afford to make the necessary investments.
It’s a vicious circle that can rob your business of the growth it so richly deserves. In worst-case scenarios, cash flow problems put businesses like yours, out of business. Completely.
What is Job Costing and How Can it Help?
Job costing is the process by which your price your services. It accounts for the true costs of performing the service so you can plan your pricing estimates to include room for doing the job while still turning a profit for your business. Essential costs to include in the job costing process include:
- Labor, which is often the biggest expense of any service.
- Time, which is one of the factors in the process that is most easily and often given away. It’s important to properly measure the amount of time the job will take and the performance of those tasked with completing the job to ensure both are effective.
- Expenses, these can be direct or indirect, but all involve the costs of getting the job done, such as equipment, tools, materials, etc.
Sometimes it takes an objective pair of eyes to look at your business and help you determine where changes could be made in the job costing process to increase cash flow and send your profits soaring at the same time.
Solving Your Cash Flow Problems
With that in mind, your primary concern as a business isn’t chasing profits. At least not in the moment. It’s about maintaining sufficient cash flow to help smooth over some of the ups and downs all businesses experience along the way.
That doesn’t mean ramping up your petty cash funds so you can handle practically every emergency. It does, however, mean making fundamental changes in the way you operate and manage your business to smooth over the rough edges related to cash flow or lack thereof.
Improving your overall financial intelligence can have a huge impact on your business, for the better. It helps you determine which expenses are essential, where you can cut overhead expenses to improve revenue, and how to use judicious spending to grow your business stronger and more profitable than ever.
Let Blue Collar Back Office help you understand your current cash flow situation better so you can identify areas