In the world of business the last people to be paid are contractors, small business operators and sole traders. Its the reason why cash flow destroys this segment of the economy and the average payment time is 45 days. Invoice2go founder, Chris Strode, explains how to prevent a cash flow crisis.
Cash flow is the lifeblood of any business, and without it, you’ll be hard-pressed to function. As a small business owner, it’s important you have enough cash to support your business and yourself through significant and sometimes unexpected expenses and quiet periods. While cash flow can suffer due to any number of things, one thing that can make it all-the-more unpredictable in the air conditioning installation industry is waiting on payments from slow clients.
In fact, small businesses tend to be the last to get paid, especially when the invoice is quite a large sum as it often is for climate control installation projects. This can hurt cash flow and put you in a sticky situation during slow periods.
Firstly, it’s necessary to study and understand how your business ebbs and flows over the course of a year. Analysing slow and busy periods can help guide you when it comes to planning major expenses, acquiring more equipment or scheduling major projects, as well as maximising your profits when you have the biggest projects. Fixed costs will be there all year round, so putting money away while you’re at your busiest will minimise the impact of seasonality for your business.
Secondly, aim to build repeat customers. Developing and nurturing client relationships wherever possible will make them more likely to return to you for more business in the future, and encourage them to refer your services to friends and colleagues.
Think about the best ways you can keep them engaged after you do business with them. This could be occasional email updates offering servicing, or tips to maximise the benefits of their air conditioner. For your clients, servicing and maintenance of their air conditioner may be just as important as the installation process. They may not require your services again any time soon, but your outstanding service will be at the top of their mind when it comes to referring you to a friend.
Further, offer convenient service all the way through to payment. Offering a wide range of payment options not only removes friction and leaves a positive impression with the client, but can also help you get your invoices settled faster. Mobile invoicing apps like Invoice2go give you an easy way to create professional estimates, invoices, and accept all the forms of online payment people expect, giving customer another reason to want to work with you again.
Lastly, build an emergency fund. Ideally, it will be 3 to 6 months worth of expenses you can use to cover rent, utilities and other costs during slow periods. Although this does take time to build up, you’ll be grateful when business slows and you have reserves to see you through.
About the Author: Chris Strode is the founder of Invoice2go, the mobile invoicing app that gives small businesses and contractors control over their time and business. As a small business owner from a family of tradespeople, Chris created Invoice2go out of frustration with the lack of simple invoicing options available. https://invoice.2go.com