So you’ve got a plumbing business. Business blooms sometimes but seems to be crashing most days?
Or perhaps you’re just on top of your game and prefer to be ahead on all affairs that can potentially enhance profitability in your plumbing business?
Whatever it is that brought you here, we’ve gathered a couple of techniques that are sure to help your cashflow become much smoother.
We get it. Small businesses aren’t always the easiest to manage. The stats state that one out of every four small businesses closes up shop permanently because of a leak in the cash flow. These ‘leaks’ can mean not having enough funds to handle salaries, repairs, and oftentimes, operations itself.
The best set plan would be to counter these financial problems before they befall your plumbing business. Whilst still on that note, below are the top tips on how to improve your cash flow for your budding plumbing business.
Cash flow tips for plumbers
1. Automate your invoices
Hey, procrastination happens to the best of us. The only way to curb this is by taking advantage of the various paid (and free) tools such as Xero which help you to send out invoices fast.
The faster you can send that invoice out the faster you can get paid for those services. It generously lowers the strain of having to send out those messages requesting a long-overdue payment too.
A helpful tip that might also gain you favorable customer care points is to grant small incentives such as discounts to customers that pay early. Nothing too exorbitant. Just a few percentages.
2. Cash flow forecast
Keeping a hawk’s eye on upcoming financial obligations can be quite the lifesaver in knowing how much you can handle to pay at certain points.
Of course, this mostly refers to bills and expenses that cannot be ignored without a dire cost.
From bills that need to be handled immediately to those in the next quarter, drafting a forecast of your cash flow and keeping it updated is necessary for eliminating unpleasant surprises.
3. Outsource as needed
No, your son who went to college doesn’t count. You’ll be surprised to find that investing in a professional accountant who is experienced with small (and large) businesses will actually help you save and make more profits.
They don’t have to be full-time at all but just somebody that pops in here and there to make sure your plumbing business functions efficiently.
4. Have flexible pay-out options
Most people don’t walk around with cash or keep it lying around in their houses anymore.
As such, you’ll probably need to have a portable swipe machine with you when you go to plumbing jobs. Mobile banking has quickly taken central attention as a payment system too and should be an option you have available. Consider the ANZ App, because it has impressive reviews from users as well as interesting features.
Flexible pay-outs ensure that you don’t needlessly chase after payments in the weeks to come.
5. Save, Save, Save
Cancel out any subscriptions that aren’t directly adding value to your company. Also, cut back on any purchases that end up lying around in your backyard not being used.
You’ll be surprised how much revenue you’ll end up saving on the side just because you cut back on the unnecessary.
By taking into account these cash flow tips you’ll be well on your way to saving big chunks of money that would have otherwise been used on unnecessary ventures. Track your payments, hire only necessary labor, and pay yourself reasonable wages regularly. This will assist you to see your financial sitting and therefore spend adequately
6. Stay ahead on unpaid invoices and on-account sale
All those uncomfortable calls inquiring on unpaid invoices are absolutely necessary. A smooth cash flow requires constant scrutiny and being on top of all your receivable accounts.
Not seeking out these much needed (and well-deserved) funds puts a strain on your cash flow.
Yes, your clients can pay for your plumbing service in installments but it’s your job to be on top of their accounts. Make sure all these accounts are up-to-date and don’t hesitate to send reminders whenever necessary.
If all this sounds like too much work for you, then don’t worry about it. Afterpay has a “buy now, pay later” option that allows the customer to receive your service without worrying about paying you upfront.
What’s in it for you? Full payment upfront.
Yes, you read that right.
Your customers then pay Afterpay for your service in installments but your accounting books are already settled.
7. Reduce operating costs and hours
The idea of employees sitting around waiting for walk-ins is a total no-no. It wastes time and you’ll still have rent to pay. This makes no sense to your cash flow if you’re not making as much money as you are when simply present in your office.
Depending on the size of your plumbing company, the best thing would be to cut back on hours spent in the office in order to attend to other work.
This may be spying on your competition, simply getting repairs done (client home visits), or sending employees home instead.
That way, your business won’t pay people for sitting but for every second that is benefiting the company in some way. A helpful tool would be the Nexvia project management system which can help you track people’s job hours.
Set up a system of “open by appointment” that allows you to be ready for a client when they show up. Otherwise, you can pick hours where you are most productive to open up shop.
8. Request a deposit on long-term contracts
Scoring a long-term contract is always thrilling because it means a steady income for a couple of months or even years!
Before you lose your head with the prospect, ask for a deposit.
This can be 10% of the full amount upfront before you’ve even begun taking a look at their piping, fittings, or heating systems. The remaining amounts can be paid as per your agreement.
Follow up if arrangements change!
9. Stall payments to your vendors
Figure out how late you can delay payments to your vendors without breaking agreements and souring your relationship with them. Of course, this is only if they aren’t offering any early payment incentives.
Doing this keeps the money in your account longer and not in the vendor’s until it’s actually expected to be there.
If possible, start negotiating the price and see if you can pay much less than you’re already paying.
10. Increase your pricing
As daunting as this suggestion is, it usually works. If you’ve already built a great client base that looks to you for its plumbing needs, then find out how high clients can go for your service.
You may worry that your sales will reduce and lesser people will want to engage you for your work but what if the opposite happens? Experiment and find out.
If you do find yourself getting cold-feet, then call us at Tradies Accountant. We’ll look over your business and decide which pricing technique will give you your desired results.