Are you running a trades-based business as a builder, carpenter, electrician, plumber, painter, or the like? If so, you probably spend most of your day focused on completing jobs for customers and organizing your team, new bookings, and material purchases.
But it’s just as crucial to pay attention to cash flow, so you don’t end up in a position where you can’t pay your workforce, suppliers, or yourself. If you find handling cash flow quite a struggle, it may help to follow a few simple yet effective tips to stay on top of finances.
Cash is king, and cash flow is essential for maintaining a successful trade business. Here's how to improve company cashflow fast:
5 Tips To Create More Cash Flow
Track Money Coming In And Out
You won’t get cash flow sorted out if you don’t pay close attention to finances. You must continually track money coming into your business and going out of it, not just once a month or quarter, but every week or even daily. It pays to use free or low-cost financial software and apps to see, at a glance, what your overall financial position is at any time.
Tools can alert you to bills that need payment soon, so you can take steps to have enough money available to pay them. They can set aside a proportion of income each month in linked savings accounts to cover tax expenses, vehicle payments, and other bigger expenses.
Watching bank account transactions will help you keep on top of accounts payable, so you don’t have issues such as duplicate payments or late payment penalties. Utilize invoice data capture programs to avoid drowning in disorganized reams of paper and emails. Tracking money makes it easier to identify areas where you may be able to cut costs, too, and pick up when you have clients who are consistently behind on their bills.
Know your numbers!
Set Budgets For Yourself And Your Team
Cash flow will continue to be an issue while you and your team spend more money than the venture brings in. To escape a downward spiral, develop a budget for different costs in your trades business. This budget should lay out how much you can afford to spend on areas such as vehicle costs, wages, marketing fees, bookkeepers, materials and other supplies, equipment, etc.
A budget guides you when deciding whether to spend money on certain items or services. You can see if you have room left in your budget for an expense or not. Running things this way takes much of the emotion and impulsiveness out of the mix, so you make more level-headed, business-minded choices.
Renegotiate Terms With Suppliers
One way to cut costs so cash flow bounces back is to negotiate better terms with your suppliers. If you have companies you regularly buy materials, equipment, or other items and services from, talk to them to see if you can get an improved deal.
For example, you might be able to renegotiate the price you pay for goods or services or obtain discounts for multiple orders per month or quarter. You might be able to arrange to return materials you don’t end up using on jobs or get longer payment options. These are all factors that can improve cash flow.
Invoice Clients Quickly And Follow Up On Late Payments
A big issue many tradespeople have regarding cash flow is that they don’t get paid quickly enough. One area where you might be letting yourself down here is if you don’t invoice people ASAP. It’s helpful to use tech tools to set up automatic invoice creation so clients get bills sooner and pay you more quickly in turn.
Software is also your friend for chasing late payments. Programs can send out payment reminders automatically for you as soon as bills become overdue, and continue to follow up with people until you receive payment.
Make Payments Easy
Another way to boost cash flow is to make payments easy for people so they don’t put off giving you what’s owed. Do this by putting payment details in large, clear font in an easy-to-spot place on every invoice. Plus, allow customers to have choices when paying, such as via bank deposits, BPAY, credit card, PayPal, and the like. If people can see their preferred payment method when they open up an invoice, they’re more likely to finalize a transaction ASAP.
Consistent Company Cashflow Conclusion
Cash flow is a crucial component of staying afloat in business, but it also tends to be a stressful one to manage. If you take charge in this area, though, and take many simple yet effective steps to get your finances under control, you should find cashflow to be more manageable over the long term. Money is the lifeblood of your business, so with the flow!
