You’ve heard it said many times: “Cash is king.” And as far as construction is concerned, truer words have never been spoken.
Your construction business relies on cash flow – you need to ensure you have more money flowing in than you have flowing out of your business to survive. But managing cash flow in construction can be especially difficult, as each one of your projects is unique, with different contract and payment terms.
Creating a cash flow forecast is a great way to overcome this challenge. Doing so will help you estimate your projected income and expenses, so you can make well-informed decisions and keep your business on track.
However, simply creating a cash flow forecast is not enough.
You get what you put into it, so if you want to see real benefits, you must regularly revisit your forecast and make updates.
This can be a tedious process if you create your forecast manually using Excel. You may not have the extra time to dedicate to making sure your forecast spreadsheets are up-to-date but luckily there’s a better way.
Cash flow forecasting software is a great way to help automate the process and save you undue stress.
As far as software choices go, you could opt for a solution dedicated to managing cash flow that provides real-time cash flow analytics or a solution that connects your back-office data to your cash flow Excel spreadsheet. With either option, you’ll know that the numbers are all up-to-date.
4 ways your construction firm will benefit from forecasting software:
1. You’ll save time
Moving to a software solution not only saves time when it comes to manually entering data, but it provides pre-built queries so you can get up and running immediately. Once you’re using the software you no longer have to worry about whether your Excel sheet is up-to-date with your latest actual and projected income and expenses. You can skip the time-consuming edits and easily create new forecasts that reflect what is actually going on in your business.
2. You’ll keep track of details better
A spreadsheet full of numbers gets the job done when it comes to cash flow forecasting, but it can be easy to lose sight of the details that provide context for those numbers. Were you factoring in additional headcount or a new project in the pipeline? Has your situation changed? A month or more may pass before you update your forecast so you might not always remember what factors went into your estimates. When using forecasting software, all of the financial changes that have occurred are automatically reflected in your forecast so you don’t have to worry about constantly noting all changes and manually updating them.
3. You’ll get a more accurate view of your finances
Besides being a tedious process, manually entering all of your data into Excel increases the risk of errors. If you make one mistake, such as a missed decimal point or transposed numbers, the whole forecast can be thrown off. Automating the process with a software solution eliminates the need for double entry and ensures your forecast is using the most current data, significantly reducing room for errors and providing you with an accurate view of your finances.
4. You’ll ensure team members are on the same page
Multiple team members might be accessing and updating your cash flow forecast spreadsheet. Collaboration is great but sharing the spreadsheet can make it hard to keep track of who changed what and which version is the most recent. While you can avoid this issue in Excel by saving your cash flow forecast to the cloud so everyone is accessing the correct version and changes are being tracked, using cash flow forecasting software ensures all team members are automatically working off the latest version so you know you’re all on the same page.
Excel is great, but…
While you can certainly create accurate cash flow forecasts using Excel, it will take extra time and resources to regularly update your spreadsheet. If you’ve been neglecting your cash flow forecast or looking for ways to save time on updates, it’s time to make the switch. Automating the forecasting process with software allows you to create cash flow forecasts on the spot with confidence so you can make better financial decisions. And that goes a long way towards your company’s bottom line.
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