How to Avoid Cash Flow Mistakes in Construction Bidding

Ever found yourself deep into a project, wondering where your supposedly hefty margin went?

Today, we're diving into a topic that hits home for many in the construction industry: navigating the tricky waters of cash flow in construction bidding.

The Tale of the Unexpected Bid Win

Imagine this: you land a project you never thought you'd get.

You bid high, aiming for a good margin to ensure victory.

Fast forward to mid-project, and suddenly, you're pinching pennies.

Sounds familiar? You're not alone.

This scenario is more common than you'd think, and it's not because you messed up the bid or didn't account for enough margin. The real culprit? Not fully understanding the cash flow dynamics of your project.

?The Cash Flow Conundrum

When you bid on a project, regardless of the margin or markup, you're committing to a certain flow of expenses and income.

It's this balance, or lack thereof, that often leads to cash flow headaches.

Recognizing this during the bidding process is crucial to avoiding financial pitfalls later on.

Bidding Process Breakdown

Let's dissect the bidding process.

You've got your expenses laid out, your margin calculated, and your overhead covered. You think you're all set, right?

Here's where many fall short: they don't consider the cash flow aspect.

Ask yourself, how much money will be going out before and during the project compared to when you'll actually see payments coming in?

If you can’t answer this confidently, then you are more likely to end up in a tight spot during the project.

The Solution? Master Your Project Cash Flow

What's the fix? Approach your bid with the same diligence you apply to calculate margins, then add a third step: mapping out the project cash flow.

Combining margins and project cash flows before bidding will help you make informed decisions about suppliers, prepayments, labor, and more, before you get too deep into the weeds. When mapping out your project cash flow, you may even find you need to adjust your margin. This is the beauty of doing this before bidding, so you know what the full scope is, without running into the issues later on.

To help you out, we offer a free project cash flow tool at Mobilization Funding. It's tailor-made for construction projects, easy to use, and best of all, it's free. No strings attached.

The Ripple Effect of Cash Flow Planning

Getting a handle on your project cash flow isn't just about avoiding stress; it's about building stronger relationships with suppliers, maintaining a positive work environment for your team, and ensuring customer satisfaction.

It's the difference between being proactive and reactive.

Driving Your Business to Positive Cash Flow?

At the end of the day, we can’t say that cash flow doesn’t matter – it could be what drives your business forward or into the ground.

Cash flow planning in the bidding process isn't just important—it's essential.

Whether you use our tool or your own method, the key is to understand your financial needs from the start. This insight allows you to make smart, proactive decisions that will steer your project toward success, not stress.

If you found this newsletter helpful, please subscribe, share it with your network, and let's spread the word about smart cash flow management in construction bidding.

If you need help or have any questions about cash flow bidding, reach out to our Mobilization Funding team, or check out our Cash Flow tool and resources, that can help get you started.

https://mobilizationfunding.com/cashflow/