As a plumber, managing your cash flow is as crucial as fixing a leak. It’s what keeps your business alive. Yet so many plumbers have no processes in place to make sure their finances are flowing just as well as the pipes they work on in the trade.
Here are five tips you can use to keep your plumbing business running smoothly.
- Know Your Numbers
Step one is to stop brushing things under the rug, and start to get a real understanding of your financial situation. Keep track of all your expenses, from the smallest washer to the cost of that new wrench set.
Use simple-to-use software to monitor your income and outgoings. This way, you’ll always know where you stand financially.
The more specific you can breakdown your incomings and outgoings, the better off you will be. For example, when it comes to reporting your finances, break your expenses down into categories such as labour costs, mileage, materials used, and any other overheads. This will give you a clearer picture of where your money goes, and allow you to make tweaks if you need to expand your profit margins.
- Prompt Invoicing
Don’t let those invoices pile up. Send them out as soon as the job’s done. The quicker you invoice, the quicker you get paid.
It sounds simple, but be honest, we’ve all pushed tedious administration tasks to the back of our to-do lists, and the back of our minds! That’s why you should consider using an invoicing system that sends reminders to your clients, so you don’t have to waste time chasing them. Also, consider including multiple payment options to make things easier, or start charging late payment fees to give your customers a sense of urgency.
- Smart Stock Management
Inventory management is a balancing act. Overstocking means your money is tied up in parts sitting on the shelf. So you could stock what you need and use suppliers who can deliver quickly when you need more. This approach keeps your cash available for other important aspects of your business.
However, make sure you don’t tip the scales too far one way, so that you’re scrambling around for kit and having to pay late fees. The best way to get this right is by making it part of your daily or weekly routine to take check of what you have in stock, and also what jobs are around the corner.
- Plan for the Slow Times
Hopefully, this doesn’t happen too often to you, but as you’ll know, plumbing isn’t always predictable. There may be an occasion where you’re not filling your diary up with jobs, and the last thing you need when that happens is to feel a sense of panic. Instead, save a portion of your earnings during the busy periods to tide you over when work slows down. This emergency fund can be a lifesaver for your business during lean times, and knowing you have some funds tucked away will keep you stress-free.
- Review Your Prices Regularly
When times are slow, you may get tempted to lower your prices in order to compete for work. Promotions can be a good idea, but please, whatever you do… Don’t sell yourself short.
We see examples all the time of plumbers not earning enough profit on each job – they charge too little, work hard, and by the time they’ve factored in expenses, they’ve barely earned any money at all. This is one sure-fire way to run yourself – and your business – into the ground.
To avoid this happening, review your pricing regularly to ensure it reflects the quality of your work and the current market. Don’t be afraid to adjust your rates to match your experience and expertise. If your prices are higher to begin with, you may even find you have more wiggle-room for negotiation.
Become a King of Cash Flow
Managing cash flow is not just about keeping track of the money coming in and going out. It’s about making strategic decisions that ensure your business’s financial health in the long term.
One strategic decision you could make is getting help from job management software such as Fergus, to help you with scheduling, quoting, invoicing, and financial reporting. If you already use accounting software, Fergus offers integration to keep all your business management in one place.
And, as a bonus, APHC members get 15% off Fergus for life!
If you’re somebody who enjoys life on the tools, but the money side of your business doesn’t come naturally, don’t worry. Mastering money takes time. Remember, just like plumbing, cash flow management is a skill – and with practice, it becomes second nature.
For more information on Fergus and for a free trial visit www.fergus.com
