Like any other small business owner will attest, running a plumbing company is hard work. According to a recent survey, nearly 50% of plumbers believe that cash flow problems are the biggest challenge facing the industry today. The second-biggest challenge ties into the cash flow problem too: More than 30% of plumbers say getting more customers is extremely difficult.
There are more than 425,000 plumbers, pipefitters, and steamfitters in the United States, according to the Bureau of Labor Statistics. By 2024, nearly 50,000 new jobs will be created in this field, representing growth of 12%—which is higher than the average industry will experience during the same time period.
There are a number of reasons plumbers encounter cash flow problems, including:
Customers don’t settle their bills on time
They may even refuse to pay their bills altogether
A competitor might steal some clientele
There may be an accident on the job, resulting in unforeseen expenses
Equipment or machinery may unexpectedly break and need to be replaced
New taxes or regulations could cut into profit margins
Remarkably fewer customers may experience plumbing problems during a specific time period compared to historical data
It comes as no surprise that cash flow problems force one out of every four small businesses to shut their doors for good. When cash shortages materialize, it can be difficult for plumbers to pay employees, keep up with recurring operating expenses, buy new equipment and supplies, spend money on advertising to gain new customers, and pay for repairs on service vehicles, among other things.
Instead of waiting for cash flow problems to affect your small plumbing business before figuring out what to do, you’d be much better off proactively managing your finances. There are a number of tactics you can employ to reduce the chances you encounter cash flow problems in the first place. With the right approach, you can be confident you’ll have the money you need to settle your obligations and grow your business right when you need it. With that in mind, here are five ways plumbers can solve cash flow problems before they occur.
5 Ways Plumbers Can Prevent Cash Flow Issues
1. Forecast your cash flow
Cash flow forecasting enables you to know with a degree of certainty whether you’ll be able to meet your upcoming financial obligations. In some cases, that entails bills and wage expenses that are due in the coming weeks while in other cases it entails bills that are due next quarter—and even beyond. When plumbers create a cash flow forecast and update it on a regular basis, they can eliminate the possibility they’ll be surprised when it’s time to settle an account. Improve the accuracy of your cash flow forecast over time to achieve the best results.
2. Outsource when you can
Do you really need a full-time employee handling your accounting or would it make more sense to outsource those responsibilities to a third party? Do you really have to head to a job three hours away or would it make more sense to find a subcontractor to handle it so you don’t spend so much time on the road? Outsource responsibilities where it makes sense to save some money.
3. Change the way you invoice customers
Many plumbers finish a job, leave, and bill their customers at the end of the month. Is there any reason you can’t give your customers their invoices the moment work is completed? For plumbers, that could prevent cash flow delays. Consider offering your customers an incentive to pay early. If they give you a check the day you finish a job, perhaps you could offer them a 5% discount. If they pay within two weeks, give them a 2% discount. Whatever you do, don’t wait until the end of the month to send your invoices out.
4. Use an invoice financing service to combat late payments
Despite your best efforts, plumbers will run into cash flow issues, and some of your customers will invariably be late to pay their bills. Such is life. In fact, 64% of small businesses are routinely affected by late payments. Instead of spending a ton of time tracking down customers and asking them to settle their accounts, use an invoice financing service like Fundbox that allows you to advance payments on outstanding invoices. Set up an account, connect it to your bookkeeping software, and once approved, choose which invoices you want to advance. Money is sent to your account is as soon as one business day, and you then have 12 or 24 weeks to repay the advance, plus a small fee. (If you’re not using bookkeeping software yet, it’s time to make the switch.)
5. Shop vendors and suppliers
Are you getting the best deals on your propane torches, metal files, wrenches, augers, and other plumbing supplies? Could your insurance, communications expenses, or electric bills be cheaper? Do your due diligence to shop vendors and suppliers to make sure you’re getting the best prices possible. You never know when a quick phone call can save you a ton of money.