Running a plumbing business is challenging, as any other small business owner will attest. One of the biggest difficulties plumbers face, especially during the early stages of their venture, is cash flow.
There are several reasons why plumbers experience cash flow issues, including:
- Clients fail to pay their payments on time. In some cases, customers might even completely forego paying their invoices.
- An accident at work could lead to unanticipated expenses.
- A regular customer chooses to start using the services of a rival.
- The need to replace equipment or machinery arises out of the blue.
- Profit margins are impacted by new taxes or restrictions.
- Failure to have plumbers insurance in place to cover the costs of accidents or damage.
The scary fact is that one in four small enterprises permanently closestheir doors due to cash flow issues. When cash flow problems arise, plumbers may find it challenging to pay their employees, maintain their regular operating costs, purchase new tools and supplies, invest in marketing to attract new clients, and maintain their fleet of service cars.
You would do far better to actively manage your money than to wait for cash flow issues to negatively impact your small plumbing business before taking action. There are several strategies you may implement to lessen the likelihood that you will ever experience cash flow issues. If you take the appropriate steps, you can be sure that you’ll have the funds available when you need them to meet your financial responsibilities and expand your company. In light of this, here are five ways plumbers can prevent cash flow issues.
- Forecast your cash flow
With the help of cash flow forecasting, you may determine with some degree of certainty if you’ll be able to meet your future financial obligations. That includes paying bills and wage costs that are due in the upcoming weeks in some cases, and bills that are due the following quarter and even later in other cases. Plumbers may reduce the likelihood that they will be caught off guard when it comes time to settle an account by creating a cash flow plan and updating it frequently. To get the best outcomes, gradually increase the accuracy of your cash flow estimate.
- Outsource
Do you really need a full-time employee to handle your accounting, or would it be wiser to contract out such duties to a different party? Do you really need to drive three hours to a project, or would it be better to hire a subcontractor to handle it so you don’t have to? Where it makes sense to do so, outsource tasks to save money.
- Modify how you send invoices to customers
Numerous plumbers complete a task, depart, and then bill their clients at the end of the month. Is there any justification for not sending invoices to clients as soon as work is finished? That might avoid delays in cash flow for plumbers. Think about providing a discount for prompt payment to your consumers. You might also offer them a 5% discount if they give you a check the day after you complete work. Give them a discount of 2% if they pay within two weeks. Whatever you do, don’t put off sending your invoices until the last day of the month.
- To combat late payments, use an invoice financing service.
Despite your best efforts, you will inevitably experience financial difficulties, and some of your clients will be late with their bill payments. This is life.Utilize an invoice financing solution that enables you to receive payments in advance on past-due bills to avoid spending a lot of time locating clients and requesting that they settle their debts. Create an account, link it to your accounting program, then decide which invoices you want to advance when it has been approved. You have 12 or 24 weeks to repay the advance plus a small fee when the money is transferred to your account as soon as one business day. (If you haven’t already switched to using bookkeeping software, now is the time.)
- Shop around for suppliers and manufacturers
How much are your propane torches, metal files, wrenches, augers, and other plumbing equipment costing you? Could you reduce the cost of your insurance, communications costs, or electricity bills? Make sure you shop around for the greatest costs by doing your due diligence and comparing different suppliers and dealers. You never know when a short phone call will help you save a ton of cash.