Managing cash flow is vital for all small businesses, and trades are no exception. No matter how good you are at your work, if your bills are due before your receivables you’re going to have problems. According to the most recent small business survey, 42 percent of small businesses find cash flow an obstacle to their business, with 7 percent citing it as their main obstacle. In this article we run through some of the most common reasons that trades experience cash flow problems, as well as the steps you can take to avoid them.
The 3 causes of cash flow problems.
- Being Slow To Send Invoices – Managing invoices has traditionally been time-consuming and incredibly dull, so it’s understandable that you might fall behind on your invoices, but a delay in sending out invoices naturally means a delay in getting paid.
- Slow Receiving Invoices – There are many reasons why your customers may not be paying your invoices as quickly as you’d like, from overly long payment terms to making it difficult for customers to pay. 57% of small businesses suffer experience difficulties due to late payments from customers.
- Slow payment methods – Although becoming less common, slow payment methods such as cheques only further delay the time it takes for the money to hit your account.
5 ways to overcome cash flow problems.
- Send Invoices Immediately – The right invoicing software allows you to send invoices within seconds, meaning you can send your invoice whilst on the job instead of saving them up until you get home at night. Deal with invoices as they crop up and you’ll never have to deal with a nasty backlog.
- Track The Invoices You Send – Keeping track of your invoices can be challenging, especially if you deal with lots of customers every month. Sending invoices electronically gives you the ability to manage them from one screen, telling you what’s been paid, what’s outstanding and when you can expect to be paid. Use the right software and you can also automate reminders to be sent to your customers so that you don’t have to do the chasing up.
- Improve payment methods – Trades have favoured cash for a long time but with the advent of chip & pin and now contactless payments there has been a big shift towards cashless payment. Customers don’t want to be keeping large amounts of cash in their homes, so trades who can offer their customers a range of payments will be rewarded.
- Reduce your payment terms – Payment terms should strike a balance between what works for you and what is reasonable for the customer. It may be worth testing different payment terms ranges to see which works best for you.
- Be aware of your cash flow cycle – Trades more than most suffer from peaks and troughs in the work schedule, so be aware of when you’re likely to be getting less work and manage your cash accordingly.
How our quotes and invoices software for trades can help you stay on the tools!
We built our office package with our members in mind, and every feature should help you making running your business easier so you can focus on the part of the job that you enjoy. Being on the tools! If you would like to know more about Expert Trades or how our quotes and invoices software for trades can help you, give us a call on 01215155984, at a time at suits you.