In order to pay their employees, landscape business owners must have a steady, positive cash flow.
But, hurdles like slow winter months or the lag time between issuing invoices and collecting payments can interfere with cash flow for landscapers. Without enough money available to pay their employees, these business owners are forced to take out additional loans or make late payments on existing loans. This results in fees and spending extra money to make up for a temporary lack of money. Talk about counterproductive!
Even if your business is profitable in the long haul, you will run into trouble if you don’t have money on hand regularly for your expenses. A steady cash flow is essential.
So, how do you ensure cash will be available when you need it?
1. Adopt the Profit First System.
Like it or not, we tend to use the money we have. Like Parkinson’s Law states, by default, we deplete all available resources. So, if all of your money is in one account, you’ll spend it all rather than save some for those slow months, taxes, or unexpected expenses like equipment repair.
You can avoid this slippery slope by adopting a system like Profit First, which teaches practitioners to have separate accounts for such expenses rather than running all finances through a single operating expense account. Regularly transferring income into each account ensures you won’t spend what you’ll need later. Think of it like an envelope system for cash where you are in the driver’s seat, deciding where to place each hard-earned dollar.
2. Collect payments promptly.
Cash flow for landscapers improves significantly when payments are collected from customers in a timely manner. Payment on the day of service is preferable, which is why I recommend requiring each customer to authorize a credit card on file with you. This system is usually attractive to customers as well because it’s one less thing they have to worry about. You charge their card (on your timetable!) instead of them having to remember to pay.
Once you have their card information, you can charge each customer on the day you service their property. Or, you can experiment to decide what kind of fee schedule works well for your customers. For example, rather than biweekly payments on the day of service, you could charge a smaller amount but on a weekly basis. Regardless of the particulars that will work for you, avoid offering your customers the luxury of a 60 or 90-day turnaround period for work. You will need to pay your crew for those jobs well before then.
3. Prioritize bookkeeping.
Equip yourself with real-time knowledge of your company’s performance by keeping your finances organized. In order to have a steady, positive cash flow, you need to know where your company stands. Don’t make bookkeeping an add-on to someone else’s job.
One way you can ensure accuracy is to outsource your bookkeeping to a seasoned professional whose sole responsibility is your books. In addition to recordkeeping, a bookkeeper can be an advisor. He or she can make suggestions to your systems and also alert you when certain accounts need attention.
You can’t get better when you don’t know your pain points, so make sure you are prioritizing bookkeeping.
Don’t simply take our word for it.
Landscape business owner Joshua was constantly struggling to maintain enough cash in the bank for his weekly payrolls – especially during the slow season. Wanting to get back on track financially and eliminate the dread in the pit of his stomach, he reached out to us.
First, we got bookkeeping up to speed for Joshua’s company – paying all outstanding invoices, requesting outstanding payments from his customers, and tracking expenses so we could gain an accurate understanding of the business’ finances.
Next, we implemented Profit First. This provided instant clarity for Joshua so he could see where all of his money was going. This also set him up for success with accounts for each of his expenses, payroll included.
Finally, we created a more efficient system for collecting payments. This alleviated the burden of not knowing if he would have enough cash for payroll each week.
If you’re ready to pocket more cash year-round and stop dreading the famine that comes in colder months, schedule a call with us today. Together, we’ll make a plan so you can feel confident on payday – no matter what month it is.
