What to do before accepting a new project
In the first month of 2022, we have heard of two construction companies heading into Administration – Beaumont Morgan Development and PDR Construction.
They go into administration leaving projects still to be completed and will leave hundreds of sub-contractors without pay.
Understandably the last two years have proven challenging for all construction companies because of the Covid situation, with materials harder and more expensive to source, projects being put on hold and staff illness meaning smaller workforces however, these changes can cause a huge domino effect if your company is not looking at the bigger picture.
Do you know if you are in the position to take on the next project?
ɪᴛ ɪꜱ ᴛɪᴍᴇ ᴛᴏ ʙᴇ ᴀᴡᴀʀᴇ:
- Before taking on a new project, you need to assess the risk and financial position of your company.
- You are about to start a new project, and you know how much you will be getting paid once you have completed the job.
However, will this project put you under financial strain before completion?
You may need to pay for materials, your workforce and other costs, long before you receive that payment for the project.
ʏᴏᴜ ɴᴇᴇᴅ ᴛᴏ ʙᴇ ᴘʀᴇᴘᴀʀᴇᴅ:
- Before you accept a new project, you need to know how it will impact your cash flow.
- Perhaps, you need to negotiate a deposit upfront first. This is something that will need to be agreed upon before signing on the dotted line of a new project.
- Having a project cash flow forecast is a must-do task.
- What margin will you make on that project and what’s more – will the gross profit margin cover your overheads? Your overheads are all your administration costs, like insurance, Director’s salaries, rent, rates, fuel and other costs which are similar every month regardless of the turnover.
- And finally – what processes do you have in place to manage the project in real-time?
DO YOU HAVE A BUDGET FOR A NEW PROJECT?
At Prevail Accountancy we want to help you succeed with the correct tools to ensure you can update your budgets and cash flow in real-time without all those fiddly spreadsheets or loose papers hidden in drawers.
We help you to implement processes you can trust, which provide real-time financial information to help you make the correct decisions on projects.
Many of our clients managed to reach their targets within the last two years, despite the Covid crisis. That is all thanks to processes control in real-time for every project.
How badly your company has been affected by the current situation?