Switch to regular cash flow by requiring a deposit
No matter your trade, cash flow is the lifeblood of a successful business. Without a steady cash flow and streamlined payment processes, it can be difficult to sustain your electrical business’s longevity.
Keeping a finger on the cash flow pulse can not only help your business survive slower periods, but it can also help when it comes to planning and budgeting for upcoming jobs or large expenses.
One way to generate a steady cash flow is to request a deposit before you start work on each project. A deposit is a great way to formalise a job and ensure that both you and your client are committed to seeing it through to completion. It’s also one of the best ways to boost your cash flow and positively impact your day-to-day financials, especially if the project has up-front costs before it can commence. Here are some of the ways requesting a deposit can boost your cash flow.
Automate the incoming money
To operate a successful business, it’s important that there is more money coming in than going out. While many electricians might take this as a given, it can be deceivingly difficult to maintain a positive cash flow. Whether you’re working on a small, one-off job such as rewiring a single light or a large undertaking such as the installation of electrical systems in an entire house, a deposit provides peace of mind that you will be able to cover the costs of some or all resources, wages or other business expenses before the job is complete.
Requesting a deposit may seem daunting, however there are a multitude of small business tools available that can provide you and your client with the confidence to move forward. For instance, mobile invoicing app Invoice2go allows you to request a deposit on your approved estimate right from the palm of your hand. Digitally requesting a deposit makes it easy for your clients to pay, boosting your cash flow and saving you time on the paper trail down the track.
Cover out-of-pocket expenses
Not only can deposits help to boost your cash flow during slower periods, but they also provide a safety net to cover any unexpected out-of-pocket expenses that might occur. While regular wages, basic equipment and standard tools are expected and budgeted for, on occasion, a job might require specialised equipment that you don’t have immediate access to. The pain of being caught at a job site waiting for the scissor lift or generator to arrive is only heightened if you need to reach into your own pocket to cover the cost. Deposits ensure that when these extra costs come, you won’t be left out to dry waiting for the invoice to be paid.
Take the guesswork out of your finances by providing clients with a cost estimate, and structure the deposit amount and payment schedule around it. Typically, the larger the project is, the larger the deposit should be. However, working with your client to reach an agreeable amount that works for the both of you can help them feel less hesitant to hand over the amount, while at the same time feeling like their needs are being met. Cover your expenses and keep your clients happy — that’s what we call a win-win!
Supply payment terms to get the job started faster
Outlining payment expectations and requesting a deposit gets your working relationship off on the right foot, and allows you to spend more time focusing on what you’re there to do — electrical work. Imposing payment terms that require payment in, for example, 15 or even 30 days and charging interest or a small fee for those customers that miss the deadline can help boost your cash flow by helping you get paid, and get to work, faster. Becoming more efficient with deposits, invoicing and payments over time can help you to streamline your business’s processes and, as a result, potentially expand your workload. The more customers you’re able to service, the more money you will see coming in.
Requesting a deposit before you begin a job can be a great way to generate consistent cash flow for your electrical business. It can also provide the stability and certainty that you can get to work sooner and get paid faster.
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