26 Mar Guest Blog – Five SIMPLE Ways To Improve Your Trade Business’s Cash Flow!
Do you sometimes find yourself looking at your business bank account and becoming INSTANTLY stressed?
The balance is low, and you’re thinking to yourself… “how am I going to pay wages, bills, suppliers, BAS, super…. (the list goes on)”?
We’ve all been there at some point. We’ve all had POOR cash flow!
In fact, as a Tradie wife myself, I understand the stress.
At one point in Andy’s (my husband) and I’s plumbing business, we were growing at a rapid rate. We went from a 1 man show to 17 trucks in no time, and our Profit & Loss report was telling us that we were KILLING IT!
The truth is, whilst your P&L is an important report to monitor, we were also neglecting a more important report… Cash Flow.
Whilst P&L reflects that the invoice has gone to a customer. It does not reflect that you’ve RECEIVED the payment from them.
On the other hand, looking at your business’s cash flow helps you understand past and future trends of money moving IN (customer payments) and money moving OUT (bills, wages, etc.).
Tracking and predicting cash flow allows us to:
- Ensure there is enough money in the bank to cover cash payments.
- Ensure there is enough money in the bank to cover BAS and tax payments
- Avoid bank charges from overdrawing
Once we started monitoring our Cash flow, we soon realised the strife we were in. Money was leaving our bank account faster than it was coming in!
We had the worst cash flow EVER!
And there is nothing else that will kill a business quicker.
So what lessons did we take from this situation that you, as the Tradie Wife/Partner, can now implement in your business to improve poor cash flow?
Here are six easy ways to improve cash flow in yours and your partners business…
- Payment from customers upon completion of the work!
When quoting for customers, get them to sign the quote as ‘acceptance’ of the quote and inform them that payment upon completion is expected.
On top of this, if it is a longer project, have them pay a non-refundable deposit.
Ensure you explain these terms when BOOKING the customers job, so they know exactly what is expected.
Our admin staff literally say over the phone, “…we do require payment upon completion via cheque, cash, or credit.”
Communication is key!
By collecting payment straight away – you are improving your cash flow, whilst also saving you the hassle of chasing them down for payment later!
- Clear Payment Details.
Make it easy for your customer to pay you by having CLEAR payment details on all your invoices.
Make sure that all your card payment options are listed (with appropriate card surcharges mentioned if applicable) and your bank account details for direct deposit are clear and correct.
- Don’t Pay Bills Early.
If your bill isn’t due for another 60 days. Don’t pay it on the day you receive it, pay it when you’re ready!
In saying that, don’t leave it until the last minute to pay. You wouldn’t appreciate it if a customer of yours did the same thing to you, what comes around goes around!
- Take Advantage Of Discounts
How many times have you noticed a bill from an electricity provider that states “pay $800 on X date or pay $900 after X date”?
This, is a cash discount. Where the supplier offers a discount to consumer if they pay the bill before the due date.
If a supplier offers this, take advantage of it to save yourself some cash!
- Regularly Chase Up Customer Payments!
In the instance where your customer hasn’t paid up-front, have a debt collection system in place!
You can check out our debt collection process HERE. Implementing this was honestly one of the best things we could have ever done for our cash flow. It took our outstanding payments from $200,000 to under $10,000 and SAVED our business.
So tradie wives & partners… these are just SOME of the ways you can improve cash flow in yours and your partners business.
It’s all about pulling in money OWED to you as soon as possible, and paying out money YOU OWE as late as possible.
If you’re interested in learning more about your trade business profit & loss, cash flow, and more, check out Episode 6 of The Tradie Show, ‘The Tradies Guide to Understanding Your Numbers’. CLICK HERE to watch it for free.