Managing the finances of your trades business can be an emotional rollercoaster ride at the best of times. With so many tasks to juggle, one of the most critical is cash flow management if you want to run a successful business. If you feel like you’re always struggling to stay on top of cash flow, we’ve got some handy cash flow management tips that can help you improve your day-to-day processes so you can run your business without unnecessary stress and anxiety.
What’s cash flow management?
This is the process of tracking the inflow and outflow of money in your business. For trades and construction businesses, this process is extremely important since your projects can involve large sums of money that are paid in stages. To manage cash flow effectively, you need to have a clear understanding of your financial situation and how your current processes affect it.
Simple ways to improve your cash flow
1. Streamline Your Finances with an Online Accounting System
An accounting system can help you keep track of your finances and make better-informed decisions. Don't rely on spreadsheets or outdated systems, invest in accounting software, to help you stay on top of your revenue and expenses, and to send electronic invoices and reminders.
2. Get the Right Accountant for Your Business
Not all accountants are created equal. Make sure you find an accountant who understands your trades and construction, and can provide the right support for your business. While there is an immediate cost to using an accountant, a good one can save you a lot of time and money in the long run.
3. Train Your Team to Master Cash Flow Management
Your staff are the backbone of your business, so make sure they're equipped to handle cash flow management. Provide training and resources to help them understand the importance of managing finances effectively. Whether learning how to do the bookwork properly simply being more responsible with spending, everyone plays a part in cash flow management.
4. Stay Organised and Stay Ahead
Keep track of your projects, invoices, and expenses in a centralised system, and establish processes to ensure everything runs smoothly. Project management software is relatively inexpensive and easy to use once you get over the learning curve.
5. Don't Overspend Your Cash
Stick to Your Budget Overspending can quickly become a problem, especially if you're not keeping track of your expenses. Establish a budget and stick to it to ensure you're not overspending your cash. It'll help you manage your finances and plan for the future.
6. Get Paid Faster with Better Payment Terms
Do you feel like you're always waiting to get paid? Negotiating better payment terms for your business can help you get paid faster and improve your cash flow. When you send out quotes, be clear about what’s due up front, when instalments are due and what happens if they clients pay late. Make sure this is all written down as part of your formal proposal or contract.
7. Know Your Clients: Do Your Due Diligence
Not all clients are created equal. Carrying out due diligence on potential clients can help you avoid payment disputes and problem clients. Do your research and make sure you're working with reputable clients who value your work.
8. Invoice Promptly and Regularly, and Offer Flexible Payment Options
Clients can’t pay you if they haven’t been invoiced. If you haven’t already, switch to electronic invoicing and make sure you send out invoices immediately. Set up automatic reminders before and after the due dates. You’re also more likely to get paid if you offer flexible payment options, such as credit card or PayPal, or instalment plans.
9. Quick and Easy: Speed Up Your Project Completion
Find ways to streamline your processes, reduce unnecessary paperwork, and eliminate bottlenecks to speed up your project completion time. Have a robust offboarding process so you can send out your final invoices faster.
By implementing even just some of the above tips, you’re well on your way to improving your cash flow issues. Remember to monitor your cash flow regularly, control your expenses, invoice promptly, negotiate payment terms, and consider financing options when necessary.