No matter how good you are on the tools, a successful business needs good cashflow to survive. Check out some of our tips to avoid a cash flow crisis.
As a tradie, you’ve spent years learning your trade to ensure you’re at the top of your game. But no matter how good you are on the tools, a successful business needs good cash flow to survive. Even if you’re at capacity, if cash flow isn’t consistent, your business may face challenges that can cause many small businesses to go bust.
We’ve helped many trades-based businesses over the years and share our top three tips to help you avoid a cash flow crisis.
Set clear payment terms
Australians are the worst payers in the world out of 19 countries surveyed, with the highest number of late payment days, according to The State of Late Payment Report 2016 by Market Invoice. This makes it a no-brainer to set out clear payment terms before commencing a new job, particularly if it is a first-time customer. The last thing you want is to complete a job and be chasing payment for weeks or months! Make it super clear when payment is due and outline your debt collection policies should a payment fail.
Use applications to automate your invoicing
Are you still using paper-based systems to document your spending, send your invoices, and chase debtors? It’s time to move with the times and take your business to the next level by going digital! Instead of sifting through paper receipts and spending your evenings and weekends writing out invoices, use cloud-based accounting software to automate these processes. Not only will the software do the hard work for you, it avoids the possibility of costly human errors, and removes the stress and time from you. Invoices can be sent to your customer as soon as the job is complete and automatic reminders be sent out if payment hasn’t been received.
Stay in control of your spending
When receiving payment for a job set aside money for your bigger costs throughout the year such as business insurances and paying the tax man, in addition to your regular costs of materials and wages. The last thing you want is to run out of cash and be forced to borrow. Saying that, there are times when taking out a business loan is appropriate, such as investing in new tools or vehicles which allow your business to grow.
According to ASIC (2013-14) 41% of company failures was due to inadequate cash flow and construction has the highest level of insolvency of all industries. With the help of technology, you’re in the best seat to avoid becoming a statistic. We’ve partnered with Telstra Trades Assist, which integrates with popular accounting systems helping you invoice and receive payments more quickly. To get your 30-day free trial of the app designed by tradies for tradies, contact us via the form below.
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