One of the primary headaches for tradies is trying to maintain a decent cash flow through their business to enable their enterprise to stay afloat and, hopefully, expand. Without good cash flow it’s difficult to pitch for new work that need raw materials, new tools, and possibly the employment of subcontractors, all of which often require money upfront. There are many reasons that cash flow may be held up, and it’s essential that any business owner finds ways to clear the logjam in their cash flow in order to keep things running smoothly. Let’s take a look at a few things that can be achieved with a little thought and effort that can greatly improve the cash flow situation within your business.
Once you’ve got the cash flow in regularly through your business, the last thing you want to do is to have it interrupted by a mishap, which is what can happen if an error or accident leads to a client claiming compensation from you. Get the right insurance for tradies with a tailored package from Public Liability Australia.
Firstly, invoicing. With invoicing, you have to remember the principle that those who don’t ask, don’t get it. It seems extraordinary that someone wouldn’t get round to demanding the money that is rightfully theirs, but this happens all the time in business. There are many reasons for this: most tradies are experts in their work, but have very little financial management training, and in the constant day-to-day flow of business it’s easy to forget who owes what and when. Get on top of your invoicing by purchasing a decent business software package and learning how to use it. Make sure you input all the work done and set the software to automatically issue invoices and remind you when this has been completed.
Of course being timely and efficient with your invoicing doesn’t offer any guarantee that clients will actually pay up, and so you have to be proactive in chasing them for what they owe. Remember that in 99% of cases the client is probably just as busy and has as many distractions as you have, so they have probably simply forgotten what is owing to you. For this reason, steer clear of any sense of aggression when chasing up late payments, which will simply make people put up defensive walls; polite but persistent is the way to go. Offer the client a variety of ways to pay, and if they are genuinely having difficulty meeting your invoice be sympathetic and discuss ways in which you can overcome the problem. Being paid in instalments is better for your cash flow than not being paid at all, obviously.
It goes without saying that insufficient levels of work are going to severely impact your cash flow. Yet again, being proactive is the way to overcome this: if lack of work has given you some downtime, see that as a gift that you can use to promote yourself and chase new work. You should go through your client email list and think about what you can offer them. When you were working for them before, did they mention any plans for the future? Did you do work for them that requires servicing and maintenance? Send out brief courteous emails letting them know that you have some free slots to do work for them, and maybe make them a special offer at the same time.
As mentioned above, one of the biggest problems caused for business by poor cash flow is that it creates difficulties in purchasing raw materials. The constant throughput of jobs required for a successful business can be severely impacted by a lack of capital preventing you from moving onto the next job because you can’t afford the tools or raw materials necessary. Of course, you can ask your client for money upfront, but many people are understandably unwilling to pay before they have seen any results, and it’s not a good look for your business. If you are struggling with cash flow, taking some time to price up materials can be a huge help. Don’t just accept the prices suppliers are charging; many will be amenable to offering you a discount, particularly if they see that you are going to be a regular customer. Learn to negotiate over prices, ask for bulk discounts and, if necessary, look for credit deals (though make sure you pay off the credit as soon as the client pays).
Finally, a great way of getting more work and getting the cash flowing through your business is to exploit your biggest asset, which is your satisfied customers. It cannot be emphasised enough how important word-of-mouth is to tradies: having someone telling others what a good job you did is worth far more than any advertising you put out yourself. Encourage this by creating a referral program, offering rewards for past clients to recommend you to others. These could be in the shape of a discount on future work, free servicing, tickets for events, gift cards – whatever you think will provide the greatest encouragement for clients to let others know about your great work.
