It may seem impossible to reduce business costs when prices have been steadily increasing over the past few years. According to Gordian’s Construction Cost Insight Report for Q3 2024, while some material costs have decreased, for example steel, many are still rising, like framing lumber. Any increase in cost can still be a problem for cash flow and your bottom line. Rising costs are the perfect opportunity to look at the health of your home service business’s cash flow.
Â
Cash flow is the movement of money in and out of a company. It shows how much liquidated cash your business has on hand at any given time. Ideally, you’re looking to create a consistent, positive cash flow, which means that your business has more money coming in than going out. Money coming in would be customer payments or loans. Money going out would be expenses such as material, payroll, and maintenance. If you find that you have a lot more money leaving your business than coming in – what we call a cash flow clog – you’ll need to make some changes. Here are some tips to help take back control of your business costs.
Evaluate Your Current Expenses
Looking at current expenses will help you determine where your cash flow is getting clogged. Some causes of poor cash flow include poor sales, high expenses, late payments, and underpricing.
Poor sales would mean that you are not bringing in enough customers to cover your business expenses. There are many things that could cause poor sales, such as potential customers being unable to find your business in online searches, potential customers are unsure of how to contact your business, or perhaps the pricing is too much or so low that they question the quality of your home services.
High expenses seem to be the obvious cash flow challenge. Although prices have been rising over the years, this is a perfect time to look at what your expenses are and where is your business’s money is going. You may find that you are paying for services or subscriptions that you are not using. This is also an opportunity to shop around to make sure the price you are paying is accurate. For example, the price of your internet service was part of a contract you signed two years ago. Now that the contract is up, is your internet service provider charging you more?
Late payments affect your home service business more than you know. Think of payments as the strength of your cash flow. If payments are late, the flow is trickling or dripping, which makes it difficult to pay for current expenses and plan for the future. When payments are flowing on time, your home service business is thriving, and the future is looking bright because there is no delay.
Read: How to Create Typical Payment Terms for Contractors
Many times, a home service business will offer their services at an extremely low price to ensure they are competitive and get new customers. This can lead to underpricing your services. Look at how you price your services and how much your home service business charges for services. Breaking even isn’t going to cut it. You need to have a profit to keep your business’s cash flow streaming instead of dripping. You will need to price your services effectively.
Automate Processes
Leverage technology to accelerate manual processes that eat up a lot of valuable time. Keep in mind that your time is worth money. If you’re spending time performing a task that’s preventing you from completing billable hours, that’s a cost to your business.
Using software like Project 2 Payment can help your home service business in many ways:
- It helps your business go paperless through the ability to electronically send estimates and invoices instantly.
- It streamlines the customer experience with online payment options and by sending estimates and invoices directly to your customers’ inboxes.
- It automates repetitive tasks such as payment reminders and emailing customers reminders that a project is coming up.
- Organizes scheduling, estimating, billing, and customer communication in one online system that you can access anywhere from any device.
Â
Although Project 2 Payment can’t take on revenue-producing activities for you, it can save you money by making you and your team far more efficient at sending estimates, creating invoices, and collecting payments. Its simple, easy-to-use interface helps you and your team save time and money — from project creation to payment. You can even set Project 2 Payment to automatically send invoice reminders to your customers with unpaid invoices, so you get paid faster for completed work. Now THAT’S a way to boost your cash flow in a hurry.
You may not be able to control building material costs, but there are other things you can do to lower business spending. All the hard work you put in on the front end to get costs under control will pay off (literally) in the long run. Let Project 2 Payment help you by automating some of those repetitive tasks and helping your business stay organized.
