4 Steps to Better Cash Flow
If that sucking sound you’re hearing is your cash flow this time of year, then please, read on.
What we’ve got here are a few simple ways to help avoid a cash deficit right when you need it the most: when the season kicks off and you’re buying materials for the next round of installs or repairs, paying out payroll... and still haven't received a dime for this season's work!
- Service Contracts
This is the number one way to grab cash before you get into the mix. Send out contracts that include your seasonal work and regular maintenance during the winter months. You’ll get the checks before you do the work, instead of grasping for them well after.
- Accept Credit Cards
Either before the work, on-site, or immediately following. If you accept credit cards you’re much more likely to receive payments faster. Granted, you’ll be incurring some service fees (you’ll need to set up a merchant service account for the processing which may have a monthly cost, plus a small percentage on each batch/transaction), but when you need the cash it could well be worth it.
- Require Payment On-Site
It’s true, I just wrote a blog post on why you shouldn’t be collecting money in the field. But. When it comes to cash flow, your Days Outstanding get pretty darn short when you’re accepting payment 5 minutes after completing the work. Just make sure there’s someone home to pay you! Also, you’d better see #2 up there.
- Create a Cash Flow Report
How about just understanding your annual cash flow, so you can plan for it. That means running a couple of reports (check out this blog post on cash flow reports), and actually planning how you’ll spend cash during the “off” months, so when things are gang-busters during the early season you’ll still have the right amount of cash on hand.
Your distributors will love you for this. You’ll be able to take advantage of opportunities as they happen. You’ll be able to keep up with Murphy’s Law – repairing equipment, hiring more people, etc. – instead of funding the company with your own paycheck (ouch!). And even though it may be a bit late for this year, I got your attention, right? Think about it now; work on it when you get time! Hopefully these service business tips will bear fruit!