Cashflow is the number 1 killer for small businesses and we landscapers are no exception.
To manage your cash flow you need to manage your invoices. Get them in, get them paid, and quick! It’s literally a matter of life-and-death for your business.
Here are my tips for bringing the money in:
It might sound obvious, but you won’t get paid until you do!
As soon as the job’s done get that invoice out. Don’t wait until the end of the month, or end of the week – do it now! Look to apps for help. Link your accounting software to your job software and issue on-the-spot invoices.
Don’t forget to lodge those progress claims on the larger construction jobs. They suck accounts dry with material and labour costs so it’s really important to get that money flowing back in.
Ask for a Deposit
Do not be afraid to ask for a deposit payment to book the work in. This is common practice, and the only way you can manage those big up-front material payments.
There are rules about the amount you can claim as a deposit: in NSW it is a maximum of 10 per cent (remember, Home Warranty Insurance must be taken out for the project before the client pays the deposit). Head over to the Fairtrade website for more information. A trick many contractors use is to invoice for a deposit of 5-10 per cent, then invoice for a progress claim of 40-45 per cent on the first day of construction. This method is valid and fair if you have large material purchases with long lead times.
Develop Outstanding Customer Relationships
People who like you, pay you!
This works for B2B and residential clients – the more they like you the more GUILT they’ll feel holding back on a payment. So, develop and nurture that relationship. Make sure they understand how much they mean to you. This doesn’t mean you have to grovel, just be personal. Remember their dog’s name and engage with them on a personal level.
And of course, be super professional!
Shorten Those Payment Terms
People never pay early!
Place your payment terms in the contract your client signs at the start of the job and make them short. Seven days is good.
Many builders and larger contractors will not accept seven days but try to put it in the contract anyway. Never accept anything more than 30 days.
Chase, And Chase Hard!
Don’t sit around waiting for the money to come in. Start chasing it from the day it is overdue.
The squeaky wheel gets the oil. This works especially well for B2B transactions. The accounts department will get sick of you wasting their time, so you’ll go to the top of the list every time. Call, don’t email.
Emailing the client their first reminder is ok, but after that you need to call. Keep the conversations polite and friendly while you remind them their payment is XX days overdue. The longer it goes on the more often you call, and you don’t give up until you get that payment in!
Make It Easy For Your Clients To Pay
Make sure all your payment details, the address and the invoice number (everything a human would need to pay that bill) are on that invoice, clear as day. And don’t forget the product information, the client/accounts team want to see that too.
You’d be surprised how many people sit down to pay a bill and information is missing. What do they do, chase the information? No, that’s too hard, they don’t have time. They put it to one side and say, “I’ll get to that later…”
Set A Payment Schedule
For larger jobs, with progress claims, set the payment schedule in the contract and stick to it. The clients will expect the bill as per the payment schedule, and you won’t have any trouble getting it paid.
An added extra is to email the client a week before the invoice is due to go out, with a reminder that they should expect the invoice next week.
Don’t Let The Client Owe You Too Much
Don’t let the client rack up a huge bill with you. The more they owe the more control they have over you. When the client has control, they control the negotiations, and they’ll want discounts etc. If you think the client is dodgy, or going to have trouble paying, adjust your terms and invoice smaller amounts often.
Be prepared to walk off the job until the claim is paid (be aware of breaches in contract if you decided to do this. Check with your solicitor first.) This may stuff you around, but it might be the only way to stop the client racking up a huge bill.
Get Variations Signed Off
Make sure you have a paper trail for every variation, with the variations sum (or rates) and client’s signature included. You are far more likely to get the variation paid if the client has formally agreed to it (as they should) and you’ve got proof. Not only willyou win the argument in court, they’re just more likely to pay it.
When you issue a variation inform the client how they will be billed. If it’ll be tacked onto the final invoice, or if they’ll see it in their next progress payment. If they know what to expect they’ll be much more receptive to it when the time comes.
If you’re worried about a client’s ability to pay you can offer them a payment plan. Have an open and honest conversation with the client; remember they will probably be embarrassed and try to come to an agreement that works for you both. This is a last resort, but it’s better than not getting paid at all.
Keep Records of Your Work
Keep records of the work you did, so that if it does get nasty you can easily back up your claim.
Record material and subbie costs clearly against the job and log all labour hours. A copy of this evidence with a strongly worded letter from your solicitor should be all you need to get that invoice paid. Failing that, the evidence will be invaluable in court.