YOU NEED TO KNOW ABOUT TRADES AND CONSTRUCTION:
Construction businesses buying and selling land need to ensure they are applying the ‘margin scheme’ (if applicable) correctly to ensure that errors in this area are minimized as they constitute large sums of money that can significantly impact the finances of the business.
Trades and construction businesses need to monitor their cash flow closely and can optimize their collections effort by ensuring they have a set terms of trade, obtain appropriate purchase orders prior to starting works, bill in progress payments instead of at completion and having a good debt collection and stop work policy.
It is paramount to monitor key cash flow metrics such as cash flow forecasts and working capital reports to ensure there is enough in the short-term to meet ongoing obligations. Continuous underperformance may indicate solvency issues.