All businesses have ups and downs in their cash flow from time to time, but if you’re finding yourself in a bit of a crisis, it might be time to step back and look at how you can develop a more consistently profitable business. Here are 10 practical tips to help trades business owners combat cash flow problems and get back on track.
Some people invoice once a month or once a week. To ensure you’re getting paid as and when you need to get paid, invoice immediately after a job has been completed, then you’re not waiting around.
Depending on the size of the job, you may implement a deposit system to secure the job and the final amount on completion.
Work on your business not just for it
Set aside time each week to work on your business. Check your invoices, what has been paid, what hasn’t been paid, what’s due. Check out your workload – what jobs do you have coming up, is this enough work to sustain you or do you need to go about trying to get more jobs by doing some marketing? Have you paid all of your bills that are due? Make the phone calls or send the emails required to follow up on any items outstanding.
Hire a book keeper or accountant
Don’t have the time or motivation to do all of this? Hire an accountant or book keeper you trust to do all of this for you and provide you with a report.
Purge repeat late payers
Clients or suppliers that are continually late paying their invoices – get rid of them or stop working with them until all outstanding monies are paid up. You can’t keep working for free and late payers are costing you money.
Do a business budget
It’s important to know where all of your money needs to go each month so you can pay yourself a wage and make sure everything else is running smoothly. You must have a business budget to ensure this happens.
Reduce labour costs
If you’re really feeling the pinch, you may have to make some drastic changes to eliminate some of your overheads. You may need to reduce the number of employees or contractors you have or look at what jobs or services can be outsourced for a cheaper rate. If there is anything or anyone who’s not working effectively – now might be the time to get rid of them.
Reduce miscellaneous expenses
One small saving might not make a huge difference but several small savings will add up. Assess your expenses, is there anywhere you can do things a little cheaper? Will changing providers save you money on your phone and internet bills? What maintenance charges are you paying? Can you lease equipment rather than buying it? Is there another financial institution offering lower fees that you could move your accounts or insurances to?
Change your payment terms
If you’ve had 30 days on all of your invoices, maybe it’s time to change to 14 day payment terms instead if it’s affecting your cash flow.
Remember that your customer always comes first
Your customers should not be aware of your cash flow issues, they should not be treated any different and they should continue to get the same service they expect of you even in these times of crisis.
For more handy business advice, head to our Tips for tradies page on the All Trades Cover website or to see if you can save on your insurance, contact us today on 1300 826 850.