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A construction business can be profitable on paper and still run out of cash. In this episode of The Cut, host Chris Bergin speaks with Victor Zhou, a fractional CFO specialising in the construction sector, about why cash flow problems develop, how builders and developers can identify them early, and why borrowing more money is rarely the real solution.
Their conversation ranges across the changing construction market, private credit, working capital, project forecasting and front-loaded claims — and the financial pressures facing Australian builders and developers today.
Victor also makes the case that construction businesses need to think beyond their next project and treat every project as an investment in the business itself. The key message is a simple one: understand your cash flow early, identify the source of the problem, and take action before you need the money yesterday.
Key Points
- Cash flow problems need to be identified early. The answer isn't always another source of funding. A business first needs to understand how it arrived at its current position — and whether cash is still leaking out.
- Every construction project creates a working capital requirement. Builders can spend on labour, subcontractors and materials 30 to 60 days before payment arrives, making working capital critical as projects grow in size and number.
- Forecasting is an early warning system. A project budget doesn't need to be perfectly accurate. Its purpose is to surface problems early enough to act — rather than needing money immediately.
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