Cash flow and workflow are two of the major challenges facing many trade businesses. A lot of tradespeople will be familiar with working into the evening or at weekends doing the admin, or having profit but no cash to draw on because it’s sitting in stock or accounts receivable.
If that sounds familiar, it's time to ask yourself whether you are currently working for your business, or if your business is working for you? Too many tradespeople are working for their business – even if you are the only person in your business, you don’t need to be a slave to it.
Getting good cash flow and workflow processes in place is critical to breaking that cycle. Having the right software to manage your workflows and cash flows will make all the difference, and there is a great range of trade-specific options available now. There are systems that link directly to suppliers - for example PlaceMakers can send you electronic invoices that are prepopulated inside your workflow management system.
At RightWay, we have a system coming online that will enable instant access to realtime financial information on your mobile phone. You’ll know how much you’ve spent so far that morning, the value of your invoicing, what your sales are compared to last month and the same month last year etc. It means your finger is always on the pulse without having to understand the numbers.
Software can’t do everything though. A key factor around cash flow for a lot of tradespeople is payment. It is critical to agree upfront with customers what the charges and the terms of payment will be. Forget payment on the 20th of the month, payments should be within seven days.
In our experience, tradespeople also often hang back when it comes to pursuing late payments, especially if it’s a customer who is likely to give them repeat business. That isn’t okay. If a customer is slow paying, move swiftly to recover the sums owed. If the customer doesn't have the processes in place to pay you on time, or they don’t value the service you bring enough to pay on time (and can’t agree to do so in future!), then move on to customers who will.
If you don’t feel confident in getting to grips with introducing new processes and software on your own, there are experts who can help you. And just as it makes sense to pick and choose the best customers to work with, you need to find the right advisor too.
Look for someone who questions you about your business and your needs, who can map your processes and demonstrate them for you, and who can show the value that system will deliver to you. You are looking to build a business model that delivers you three things – a profit, the ability to turn that profit into cash, and one which allows you to have the time to enjoy it.
You need to be able to easily see how much you have spent, how much is going in and out of your business account, who has not paid their bill, and where you are in regards to your annual budget. The difference to your business of having these systems in place can be huge.
Good workflow management will help position you to make a profit, and a good cash flow system means you can generate cash out of the profit you have made overall.