Capital Use Policies

Capital is to contractors what blood is to our bodies.

D. Brown Management Profile Picture
Share

We can survive days without water and weeks without food but seconds after losing blood flow we lose consciousness with death following in minutes.

Leadership Tools: Three Basic Constraints of a Contracting Business.

Conservative capital management enables the execution of effective talent and market strategies for sustainable growth.  It is important to both have high-level capital management policies as well as rigorous daily cash management processes to create this foundation.  

On the policy side consider putting in place internal covenants (rules) similar to what your bank or surety has in place.  Create policies and controls that will enable future successions to take place. At a high-level consider at least the following basics:

  • How much working capital do you need for the amount of work you are doing?
  • How much of a credit line do you need?  How should it be used?
  • What is the maximum debt:equity ratio you should run at?
  • When there is excess capital in the business beyond required needs how is it used?

We help contractors put the right levels of financial controls in place to protect the business in all economic conditions providing for smooth successions and sustainable growth. 

Schedule a call with us to learn more




18 Details That Make a Huge Difference in Cash Flow
There are 18 tactics contractors can use to improve cash flow at the project and the company level.
Project Income Projections
For a contractor to be effectively involved in the early stages of a project beyond understanding the whole project development budget, they must also understand the financing and cash flow of the project.
The Role of Key Subcontractors and Vendors in the Preconstruction Process
Subcontractors and vendors are positioned to add a lot of value during the preconstruction phase. Unfortunately few of them actually deliver that value. Learn why and what to do about it.