If you’re looking to increase cash flow within your trade business, there are a few key tips to be aware of. These tips will allow you to not only increase revenue for your business but also ensure you always have enough cash on hand at all times.
Common problems like delayed payments and improper accounting can be fatal for a construction business. So, to make sure you avoid either of these perils and more, check out our top cashflow management tips below!
1. Request a deposit
One of the easiest ways to increase cash flow is to request a deposit from your clients before the work begins. This will ensure that they pay a portion of the bill beforehand, freeing up some cash for you to use elsewhere in your business. This also minimizes the damage that can result from clients not paying the rest of the invoice on time, as some cashflow is always better than none at all!
2. Manage your accounts effectively
Inefficient accounts management is a sure-fire way to limit your business’ cash flow and its growth. Make sure you send out invoices immediately and ensure you follow up on them to make sure they’re paid on time. You can even set up automatic reminders, or issue progress invoices. Ensuring you get paid on time will go a long way towards increasing cashflow.
3. Review your pricing
One of the ways you may be limiting your cash flow is through your pricing. If your clients aren’t paying you on time, it could be that your prices are a little too high. Rather than simply lowering them and losing more money, you should check your supplier network, and see if you can’t get materials for cheaper prices, allowing you to lower your prices without losing out on any income.
4. Negotiate better payment terms
A great way to increase revenue is to speak to your clients and try to negotiate shorter payment terms. While most building companies work around a 30-day payment term, if you can cut this down you will be able to get your money sooner, at no extra cost to your customers. Getting paid faster will increase cash flow, but you can also try to negotiate longer terms with your suppliers. Being able to bring money in sooner while sending money out later is a great step towards increasing cashflow.
5. Negotiate with the ATO
Negotiating with the Australian Taxation Office (ATO) is the final way to increase cash flow within your trade business. Try to negotiate flexible payment terms on all of your tax obligations. If you can pay your taxes later (or if you can pay less tax altogether!) you’ll be able to once again increase your cash flow while slowing down the rate at which money flows out of your business. If you don’t want to deal with this yourself, or if you simply don’t have the time, building a strong accounting team is a great way to take advantage of any potential tax benefits.