Top 4 tips to finding the ‘money tree’ within your trade business
That ‘money tree’ my parents spoke about was always a mystery to me. In the peak of our business, with a team of 17, a ‘money tree’ could totally come in handy. Let’s be frank, no matter the size of your business, this endless supply of useful cash is going to be a benefit!
Instead of trying to find the money on the outside of my business (‘cause my backyard wasn’t looking too fruitful), I had to start hunting for it on the inside. And you’ll never believe me when I tell you but that ‘money tree’ really does exist. Want to know where I found it?
The secret is: keep money in your bank account as long as possible.
We need to get a little creative with how we go about this. In short, let me share with you 4 of my top tips to finding the ‘money tree’ within your trade business.
1. Only pay invoices when they’re due
I know it might sound simple, but it astounds me the number of tradies who receive an invoice and pay it immediately (even though it’s not due for two weeks!). Surely, the money is better in your bank account than someone else’s. Especially when it’s an offset account and doing wonders for your mortgage!
We pay invoices only on a Tuesday. Yes, yes, there are some that are urgent and are paid outside of this rule. Generally speaking, this is how we operate, and never are invoices paid early.
2. Ask for payment on the job
The term COD, or Cash on Delivery, isn’t there for fun. It means, ‘Cash Flow Or Die’. Okay, that’s a bit harsh. In all honesty, if you work in maintenance and you’re still completing a job for a residential customer and you leave and send an invoice later, you’re simply shooting yourself in the foot.
Hunting down your growing debtors list surely is the trigger you need to get your sh$t together to change your ways.
We introduce the rules about payment on completion (and provide the various options) in the conversation when the job is being booked. We even wait for their ‘okay’ response so we know they heard us. This way when the tradesmen asks for payment on completion, it’s not a shock.
3. Stay on top of your Accounts Receivables (AR), your debtors WEEKLY
The friendly pest always wins. Do you know what I mean by that? If a commercial account manager who manages 68 different buildings and 45 varied trades, who stares at over 100 invoices weekly on her desk, let me ask you this, question: who’s invoice do you think she will prioritise for payment?
a) The tradie who never rings. b) The tradie who rings and yells and screams and is irate (you might never work for them again using this tactic). Or c) the tradie who rings every week, is firm, but as nice as pie. If you answered c. you are the winner!
Stay on top of your debtors. Call every week with that smiling face, ‘How are you going with payment of that invoice for this week Sarah?’
If nothing else, they will pay you just to stop the phone calls! The friendly pest always wins.
4. Purchase assets through leasing
Have you been eyeing off a new piece of equipment, tool, or even a new vehicle for your trade business? Yes, the ones you want are often the most expensive (why is that!?!) and are often essential purchases to ensure you can operate efficiently.
Why then, do you feel you need to use up all your cash to pay in one go? If you have the money, then great, as you do make a considerable saving paying in full at the front. That said, a much better way to prevent having your money tied up in one single asset is to purchase through a lease. You can pay a monthly fee and use your hard earned money on other/better things in the business.
Did I mention that the Mercedes Benz you had your eye on is not really the vehicle asset I was thinking about. This is a ‘want’, not a ‘need’. So unless you really have the money to splash out, then keep your business financial health in mind.
There are plenty of other ways to tap into the ‘money tree’ within your business.
Like savings on credit cards (one phone call reduced our interest payments considerably) or changes with our stock management. Yes, it does seem we’ve done them all over the years in our trade business. That’s why it’s important you know what we did both right and wrong to keep the ‘money tree’ healthy, so that you can do it too.
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.