5 Steps to Better Cash-Flow Management for Tradies
Tradie businesses vary in size and practice, but they are all aiming to make a profit, and most are looking for consistent growth.
Without a keen eye and frequent review, it can be hard to stay on top of your cash flow, especially if numbers are not your forte.
Creating a forecast of your earnings and expenses will encourage you to take a closer look at your business. Comparing your incoming cash and outgoing expenses, consequently exposing the flourishing areas of your business and potential opportunities. Once you know where you stand you have the ability to make future business decisions in an informed manner and set goals for improved profit margins.
Here are 5 steps to better budgeting and cash management:
1. Understand your spending
You may already be aware of where the big transactions are going, by taking note of your fixed expenses and analysing your monthly statements. However, for a business to be successful, you need to be across your cash flow.
Cash flow management is the process of monitoring and analysing all incoming cash and outgoing expenses, to determine your net wealth. Understanding your net cash flow allows you to measure your current situation and calculate whether you have enough money to cover upcoming fees or debts.
Understanding your business’s net cash flow is essential to budgeting for the future.
2. Set goals
Once you know what is required and where there’s room for change, set small achievable goals to increase your profit, being realistic as to what you can achieve.
Check-in with your finances at least every 30-60 days to consistently evaluate your performance.
Taking it a month or two at a time, allows you to make smaller goals, stay informed, and get into a rhythm of analysing your financial movements.
3. Use technology
Make use of automatic transfers and allocate them each month, whatever remains is your petty cash and available for required extras.
Financial accounting programs can help you digitally track expenses, invoices, and further illustrate your spending habits. Excel is a great program for financial spreadsheets; however, you can seek out other programs that may be easier to use. Find some great ones here.
Budgeting isn’t limited to calculating the numbers, it’s about finding a place for further savings.
Do your research, look around to find the best-value deals. Reviewing business partnerships and service providers periodically will ensure you get the best prices and take advantage of savings where possible.
5. Make it a habit
For a financial plan to be successful it needs to play out over time (with frequent check-ins), giving you a richer perspective of your finances.
Permitting you to review and refine, reducing your spending further, or if you’re doing well, putting more into business developments. Remember you started small so there is always room to increase your savings and set bigger goals.
Financial planning and cash flow management create a framework for the future and allow you to review how you’re performing, however, it is a tool, not a solution. Use cash flow management techniques to endorse a financially healthy business.
Regular assessment and fine-tuning will ensure you’re on your way to building a business with an increasingly healthy profit.