Yesterday the reserve bank announced their decision to cut interest rates again by a quarter of a percent. Today, within the space of 15 minutes, my inbox received notifications from 3 separate regional newspapers. The topic of each article was the financial instability of the construction industry.
However, no mention was made of how to run a successful construction company and avoid financial ruin during such down times.
As always, the media likes to elaborate to create a newsworthy story. Headlines about construction software industry shakiness grab the attention of anyone with an interest in the building and construction industry.
In saying that the underlying message in all three articles is consistent. To maintain a successful construction company during the down times it is imperative to keep a finger on the financial pulse across all areas of your construction business.
Construction industry advice in the downturn
Mr Cronan (of SV Partners accounting firm) made a comment to the Sunshine Coast Daily. We quote him below, as he sums it up nicely. He says:
“Inadequate cash flow, high cash use and poor strategic management were the key causes to recent insolvency administrations within the construction industry”
He went further and urged businesses to take steps to prevent and combat financial distress by saying:
“To reduce financial risk, we urge businesses to regularly report, produce and revise budgets and business plans to support financial projections and become more vigilant with receivables collections”
The advice that the SV Partners accounting firm are providing is something we at Bizprac are passionate about. They echo a general belief that the construction industry will now start to see a downturn in project approvals. Watch for a resulting in a downturn in business.
Running a great construction company
We have addressed this issue in our blog post: 5 Ways to ensure you are maximising your builder’s margin
The article provides some useful thoughts for those wanting to run a successful construction company. Furthermore, it provides insight into how to strategically plan to ensure the business has more than adequate cash flow. In addition, the report shows how to avoid profit leakage.
Ask any successful construction company, who has been in business long enough to experience both the good times and the slow times, the underlying message will be:
“It is during the slower times in our industry where having the ability to regularly report and revise budgets to support both project and business forecasting is critical to the business staying afloat”
Fully integrated, construction software industry specific, software is one way to be able to manage and report the financial stability of the business in “real” time. That means you know your financial position at all times and not just at the end of the financial year when your accountant tells you your business made a loss!!
More than ever now is the time to take action.
Knowledge is Power – The power to take action to ensure you are a successful construction company.