By David Crary 
Half of all small businesses fail within 5 years, and one of the biggest contributors to these failures is poor cash flow. In snow removal, you work your butt off night and day until all the snow is cleared. While you wait for the next storm, you may realize that you don’t have enough money to pay your workers or fill up your gas tanks. Cash-flow problems happen when companies need to pay business expenses, but don’t have any cash because they are waiting for customers to pay them. While you try to get loans to keep your business afloat, now is the time to make sure you don’t have this problem again. Plan ahead to steer clear of the following cash-flow pitfalls.
1. Fail to get enough money up front
You have lots of up-front costs and can’t afford to wait until after the season starts to get your first payments. Require your customers to pay their first and last month’s payments upon signing the contract. Always collect fees up front and save yourself from big headaches later. Provide incentives of 2-3% off services if customers pay the entire season upfront. Your snow-removal business runs on cash, not I-owe-you’s, so don’t let your customers get away with lax contracts unless you know you have the cash on hand to wait out any payment delays. Borrowing the money through secured loans or selling your liabilities to other companies can cost you a chunk of your profits that you can’t afford to give up. Make sure both parties sign a tight contract and collect up front.
2. Fail to keep up with accounting
This is a common small-business fail. You may really enjoy maintaining your equipment and driving your skid-steer loader, but don’t like sitting at your computer trying to figure out how your business is really doing. Field-service software can really help you organize everything and make better sense of everything. Hiring a bookkeeper can help too. You need to make sure that invoices aren’t slipping through cracks and that all your accounts are up to date. Track your spending and income so you can plan ahead. Creating a cash-flow analysis will predict future cash flow so you can plan ahead for months when you will have negative cash flow. If you lag behind in your book keeping, you may be surprised by not having enough cash to pay your expenses. You don’t want to get stuck going to banks to try to get an immediate loan. Stay up to date on your accounting and plan ahead so you can keep your business running smoothly without high-interest loans that flush profits down the toilet.
3. Fail to be profitable enough
Snow-removal businesses need to carefully evaluate each type of customer they serve to make sure they are making money on each account. Some properties are more profitable than others, but if you are losing money on a client, changes need to happen. Work with your accountant and software to figure out how profitable each type of property is: small properties, homeowners associations, small businesses, large businesses, etc. If you find an area that isn’t profitable, work with your customers to make the situation profitable. On the other hand, some problem customers just need to be cut loose. Let them be some other company’s problem. Revenue isn’t good enough if it’s less than your expenses. Some areas that get snow-removal businesses into trouble are properties that require extra labor hours or expensive specialized equipment that isn’t needed for other properties. You can do great work and still run your business efficiently and strategically.
4. Fail to collect from customer quickly
This is the most common cash-flow problem in small business. You can prevent this easily by having your customers pay in advance. You can also encourage your customers to sign up for automatic payments by offering a small discount. Make sure you set up your contract to include penalties for late payments and details on sending unpaid balances to collections. Hopefully it won’t come to that. Make sure you set up payment reminders via email and phone to give your customers plenty of opportunity to pay you on time. Keep up a good relationship with your customers so they will want to stay current with you. If you do a great job for them and stay punctual, your customers will be more likely to return the favor and be punctual with payments.
Running a snow removal business takes a lot more planning and hard work than many customers realize. Do your best job, but be efficient and savvy too. Stay on top of your finances and make sure you run cash-flow forecasts so you can plan ahead for any deficiencies. Most importantly, make a plan of action in case of an unforeseen cash deficiency so you aren’t scrambling if there is an emergency. If you follow the advice above, you will be well on your way to having the cash-flow you need for a successful business.
Before purchasing software for your snow removal business, check out our free guide!
