Stay on top of your variable costs to manage cash flow.

 

  1. Variable costs – Project and Overhead
    1. Fixed costs = rent / insurance / etc. – they are the same every month and cannot be avoided
    2. Variable costs = labor / misc. spending / etc. – things that change each month and are not always needed
    3. Our costs vary every month – we need to manage those costs to avoid cash flow crunches
  2. Use your key metrics to plan ahead
    1. Billings – Job Costs = Gross Margin which needs to be higher than Overhead Costs
    2. Plan and track each month to know when you need to adjust
      1. If you miss your targets in May – make adjustments before you run out of money
      2. If you pass your targets in June – use the extra cash wisely when it comes in
    3. Use your Average A/R Aging to know when the cash flow will be short or you have additional funds
      1. If you are short in May and your A/R aging is 50 days then your cash intake will be short in July – prepare for it
  3. You know the future so plan for it and make adjustments now
    1. Look for ways to adjust your variable cost
    2. Adjust labor and overtime
    3. Avoid non-essential purchases
    4. Use the power of broke to get creative
      1. Instead of driving to job sites do video chats – saves gas money

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