Cash Flow Statement for Florida Contractors: A Simple Guide

What is the Statement of Cash Flows? The Statement of Cash Flows helps you answer the questions, "Where did my cash come from?" and "Where did it go?"

If your business is growing and you've moved to accrual books to track job profitability better (recognizing revenue when work is done, not when cash hits), this report becomes even more important. It shows what the bank account does while the Income Statement tracks profit.

Even if you run your books on a "cash" basis, recording revenue and expenses when paid rather than incurred, the Statement of Cash Flows will still detail cash transactions that don't always go through the Income Statement.

In construction, you often buy materials up front, make payroll weekly, and get paid later. Permitting and change orders can slow billing. That's where the Statement of Cash Flows comes in - it can give a good idea of where your cash is.

Quick note: QuickBooks's default cash flow report uses the indirect method. It works, but it's a bit trickier to understand (for accountants included). If your bookkeeper or accountant can provide a direct cash flow statement, ask if that's available - it's much easier to follow.

The statement is broken out into three sections:

1) Operating Activities - your regular business operations. Your customer payments, vendor bills, operating costs, etc., will be in this category. It's arguably one of the most important numbers you should track monthly. While jobs need to be profitable in the long term, keeping your operating cash positive each month will contribute to your success.

2) Investing Activities

If you're buying a new truck or equipment, these activities would be considered "investing" in assets. They're also not typical regular purchases you make as part of your business operations. These cash transactions show up here to clarify where that cash is going.

3) Financing Activities

This section explains debt and owner financing, separate from your regular business operations. If you've received a loan, this section will likely show positive. If you've taken dividends or owner distributions out of the business for your personal expenses, those will show up here.

What "healthy" cash flow looks like for a $1M–$5M contractor

You don't always need a fancy dashboard or complex report to spot issues with your cash flow. Here are a few tips to help you plan:

Cash balance: How much cash should you keep on hand? This answer can vary, but we usually recommend shooting for holding 4–8 weeks of payroll + operating expenses in the bank.

Cash Reserves: Besides your regular operating cash flow, keeping a couple of months' worth of expenses in a rainy day fund is a good idea.

Receivables (A/R) days: While you don't always have control over when you're paid, you want to stay under 30 days when possible. Importantly, you can graph this and track your overall trends to see how you're doing.

Paying off debts: Besides your regular expenses, you must consider paying your regular debt payments. These won't show up on the Income Statement as expenses.

Owner draws: Work with your bookkeeper or accountant to set a stable plan for how much you should take from the business. You don't want to take too much and starve the company of cash.

Summary:

While tracking your profitability regularly and project costing to ensure you're delivering profitable jobs, your cash flow is equally important. Review your Statement of Cash Flows regularly with your accountant or bookkeeper to monitor it and get any questions answered!

Don't already have an accountant or tax preparer? Feel free to schedule a call to see if we'd be a good fit for you. We specialize in helping Florida contractors, builders, and construction firms manage their accounting and optimize tax strategies.