It’s one of the most feared words of any entrepreneur, but it could be argued that tradespeople have it even more difficult.
Put simply, cashflow can be one of the most detrimental elements of any business, but as soon as bigger transactions enter the picture, the ante is upped again. Suffice to say, with builders, tilers, plumbers and a whole host of other contractors tending to engage in jobs worth thousands of pounds, this is a topic where it pays to be sensible.
Bearing this in mind, we’ll now take a look at some quick and easy ways you can manage cashflow as a new tradesperson – and get your business on a safe footing from the outset.
Get paid up front
This is one of the most important steps you can take to safeguard your cashflow. If a client is unable or unwilling to pay you upfront, then on some occasions it’s best to walk away.
There are a number of ways to approach this. You can request a deposit before starting work, or you can agree on a payment schedule that involves smaller, regular payments being made throughout the job.
What’s the worst thing you can do? Accept longer payment terms. Some companies will well and truly take advantage of you in these situations and hang you out to dry.
When it comes to invoicing, bookkeeping and general organization, the old adage of ‘time is money has never been more apt.
The more time you spend chasing payments, the less time you have to generate new business – it really is as simple as that.
By getting your ducks in a row early on, you’ll free up valuable time down the line, and avoid any nasty surprises when it comes to your cashflow. Put systems in place from the outset and you’ll give yourself the best possible chance of conquering any cashflow issues your business stumbles across.
Manage your costs
In any business, it’s important to keep a close eye on your costs. This is especially true in the construction industry, where materials and labour can quickly eat into your profits.
By carefully managing your costs, you’ll ensure that your cashflow remains healthy – even during lean periods. For example, if you operate as a tiler, make sure you’re given favorable payment terms yourself, paying a fair rate for your insurance and not being overly flash with cash to start with. In other words, live within your means and you’ll do your cashflow situation no-end of favors.
Don’t be afraid to chase
Invoices that are outstanding for more than 60 days are classed as ‘bad debt’, and as such, you’re well within your rights to chase them up.
Of course, there’s a fine line between being assertive and being rude, but if you don’t chase payments, you’re unlikely to ever see the money.
There are a number of ways you can do this, from sending polite reminders to using the services of a debt collection agency.