Tradies! Here’s how to maintain your cash flow
With lots on your plate as a tradie, like quoting for clients, completing jobs, buying supplies, and trying to handle marketing and accounting tasks, working life can be incredibly overwhelming.
As a result, many tradies don’t pay as much attention to their finances as they need to.
After a while, it can be scary looking in your bank account and realising that a number of your clients (or the builders you work for) haven’t paid you.
But keeping track of cash flow and ensuring money keeps rolling in doesn’t have to take a huge number of hours each week. Read on for some simple cash flow tips you can follow today.
Set a budget, reduce knee-jerk decision making
It makes a big difference if you set a budget for various costs (like marketing, supplies, vehicle expenses, apprentice wages and so on) across the year.
Then, when it comes time to decide whether you’ll spend more money in a certain area, see if you have room in your budget or not.
This helps to take emotion and impulsiveness out of the mix.
Track money, chase money, save money
It’s vital to keep a close eye on the money going in and out of your business account, so you don’t get any nasty surprises.
Understanding where your money goes also helps you to notice places where you can cut costs each month, and the best way to do this is with online accounting software.
There are many free and low-cost apps that make it quick and easy to see your overall financial position at a glance.
Software can also alert you to bills which are due for payment soon, and pay these for you automatically so you don’t have to worry about them.
Tools can be set up to place a certain amount of your income into a linked savings account each time you get a deposit, too.
Tech is also great when it comes to collecting payments from clients. Use programs to set up automatic invoice creation, so clients get billed sooner.
They can therefore pay you more quickly, which increases cash flow.
Software is also very beneficial when it comes to late payments. Arrange for emails to be automatically sent to people as soon as their bills become overdue, and every week after that until they pay.
Encourage faster customer payments
Your cash flow will really suffer if you end up with many clients who drag their feet with payments.
Apart from billing quickly and chasing overdue invoices, as mentioned above, you can also encourage quicker payments by offering a variety of transaction types.
When people have more choice, they have less reasons to delay in finalising transactions.
Consider offering direct deposits, BPAY, credit card payments, PayPal, and any other type of payment you feel comfortable with.
Make sure you let people know their payments are secure, too, if you accept payments via online or mobile point-of-sale systems.
Another way to make it easy for people to pay you ASAP is to create effective invoices.
Your bills should have payment terms listed in large, easy-to-read font, located in a prominent position on the page.
Plus, discuss your terms with clients up front, before you start work. For really large jobs, you may even want to get people to sign something to acknowledge these terms.
This doesn’t take much extra time, but ensures customers can’t say they didn’t know how to pay you.
It also shows people that you take payment seriously, and expect on-time remuneration.
Another tip is to be very careful about who you offer payment terms to.
For instance, if you do a lot of work for builders, be wary about allowing them to pay you 30 or more days after a job has been completed, if they don’t have a record of paying on time.
For new relationships, it’s often better to start with shorter payment terms and then extend them, providing payments are reliable.
Alternatively, if a builder owes you a lot of money and hasn’t paid for multiple jobs in a row, stop doing work for them until they have paid you.
Unfortunately, lots of tradies end up with cash flow issues because they’re owed tens of thousands of dollars from building or construction firms who are way behind on payments. Take steps to stop this from happening to you.
Negotiate with suppliers
Another way to boost cash flow is to talk to your suppliers about the terms you receive with them for materials.
See if you can get longer payment options, as well as discounts for regular purchases, or the ability to return materials you don’t end up using.