Fergus has released advice on how to improve cashflow, the life blood of any trade business. Having a positive cashflow indicates that your business has money left over after receiving payments on invoices and by paying all expenses incurred. On the other hand, a negative cashflow often suggests that the company is in a dangerous financial position as it may not be able to cover all associated running costs.
“Monitoring your cashflow position is crucial to the success of your business. It enables you to meet your financial obligations and to better plan for the future,” says James Chillman, UK Country Manager for Fergus. “Unfortunately, many businesses have trouble managing cashflow for a variety of reasons, as it’s usually the last thing on their mind at the end of a busy day.”
Utilising a job management system to monitor your cashflow position in real-time allows you to focus on what you need to. In the changing economy, it helps to forecast and build sufficient reserves to cope with seasonal ups and downs. From quoting clients to ordering supplies, while juggling multiple jobs and time-consuming admin tasks, means things can get stressful pretty fast. But using a system to keep on top of your cashflow will help ensure your business is staying on track.
Four ways you can manage your cashflow:
Have a financial plan
Setting a budget makes a huge difference. Establishing a budget for the various costs over the year (such as marketing, supplies, transport, wages, etc.) can help to reduce on-the-fly decision-making and allows you to see if you have room in your finances to spend money in a certain area or not.
Track your money
Avoid any nasty surprises by tracking your finances. Knowing where your money is coming from and where it is going to can help you to know where you can cut costs each month or where you may be underquoting without realising. The best way to track your money and stay on top of business finances is with job management software. This software allows you to gain real-time visibility of your business finances at a glance.
Chase up invoices
Your positive cashflow will really suffer if clients aren’t being timely with payments. Aside from gaining a visual into your overall finances, job management software can encourage faster payments from customers by offering a variety of payment options. A platform such as Fergus can also send automatic email or text alerts to remind customers of their overdue payments, all the while giving them the option to select their preferred way to pay. This helps you to get paid on time, speeding up your cash flow.
Unfortunately, a lot of tradespeople end up with cashflow issues because they’re owed a lot of money from, not just clients and customers, but also from other construction firms who are lagging on their payments. One way you can save money, time and improve your cashflow is to talk to their suppliers prior to purchasing materials and negotiate their terms. Enquire whether you can get product discounts, return materials that are unused or no longer needed and whether you can get longer payment options.
Forecast your cashflow
Cashflow forecasting involves estimating your future sales and expenses. The aim is to help you predict your cashflow on a month-to-month basis or for the whole year. Forecasting your cashflow can help to recession-proof your business because it will tell you if you’ll have enough money to run your business or expand it in the next 12 months.
Cashflow forecasting manually, without help from job management software, often leaves businesses encountering shortcomings as they don’t have sufficient data to properly predict rapid changes.
In essence, tracking cashflow and implementing a cashflow forecast helps to predict your future incomings and outgoings based on your current known costs and past revenue data.