Navigating financial pressures in construction

Navigating financial pressures in construction: Key strategies for stability and growth

Construction firms are facing significant financial pressures in all areas of the business. Research from The Construction Index shows that the average post-tax profit of the top 100 UK construction companies has dropped to just 1.7%, compared to 2.7% a year ago.

At the same time, the Building Cost Information Service forecasts a 17% increase in building costs over the next five years. That makes it imperative for construction companies to act now to ensure long-term stability and growth in the face of that growing financial pressure.

Key measures for all construction companies include effective cash flow management, optimising your financial forecasting and taking proactive measures to safeguard profits. Read on for practical advice on how to achieve those goals.

Managing your cash flow effectively

Cash flow is fundamental in any business, but especially in construction where there is so much money going in and out of each project. Managing that flow effectively is one of the most important steps any construction company can take to nurture stability and growth.

The first step is achieving real-time visibility over your accounts so you know exactly what’s coming in and out at all times. Having a true understanding of your accounts is key to preventing cost overruns, poor decision making and everything else that harms the financial health of your organisation.

Secondly, you need to use that information to manage your cash flow effectively. Inefficient invoicing and late payments from clients are two of the biggest risk factors in construction. In fact, they are among the most commonly cited reasons for construction firms closing their doors.

Minimising these risks by using technology to streamline cash flow management is a key way to navigate financial pressures in construction.

Optimise your financial forecasting

The second way to strengthen financial resilience in construction is to use your cash flow data to guide forecasting. Financial resilience relies on effective long-term decision making – a process that can be uncertain at the best of times.

After all, how can you accurately forecast the future when everything might change at the drop of a hat? That’s a big problem for construction companies when margins are tighter than ever and one wrong move can lead to insolvency.

However, if you have a full suite of centralised financial reporting, strong document management and a wealth of real-time insights, you can embrace data-driven decision making to improve your financial resilience.

Proactively embrace digital tools to safeguard your profits

The best way to understand your cash flow, take charge of your financial management and empower your financial forecasting with data is to embrace digital solutions like 4PS Construct.

Using our tool, you can access real-time dashboards showing your cash flow at the touch of a button. You can also streamline invoicing, receivables and payables for CIS, VAT and more to ensure financial compliance.

The software will also provide comprehensive financial reports and uses AI analytics to help you take that data, use it to forecast risks and help you plan accordingly. You can easily see when you will need to have higher reserves, and when you will have spare cash on hand to invest further in the business.

Smart strategies to ensure financial resilience in construction

When times are tough, every firm needs to get smarter. At a time when construction firms are contending with more financial pressures than ever, that means embracing the power of software tools to ensure stability and protect your profit margin.

4PS Construct offers an easy, complete solution that gives you full visibility over your finances and cash flow – now and in the future – so that you can operate with more confidence no matter how uncertain the economic climate.

Get in touch to learn more about 4PS Construct and how it can help ensure financial resilience in construction today. We’ll be happy to give you a no-obligation consultation.

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