Cash Flow

Lately, with a combination of today's market and other factors; we are starting to see some builders get in real financial trouble. Seems like in the last month I have heard of a real prominent builder who may pack it in, others who have huge settlements with vendors we use and still more who are just scaling-back with personnell. A lot of these builders are good builders and I wish them the very best, but I can see how these guys get in trouble. When you own a contracting business, a huge amount of cash flows through your business on a weekly basis. It doesn't matter how big you are because it is all relative to how many people and projects you have going. The trickiest part for a builder sometimes is to identify which money is his, and which money is their customers. I know it sounds crazy, but the banks fund on a percentage of completion which means that it doesn't match up dollar for dollar with your expenditures. What can happen is you all of a sudden have a padded bank account as a builder, and you begin to think that you somehow ended up with more money than you thought you would originally on a job. That is not the case. You have to be disciplined and almost put the excess cash to the side, because like many things in life- there will always be a day of reckoning.