How To Ensure Your Business Isn’t Left With Extravagant Outstanding Debt
This isn’t a trick topic… the answer is simple. In the maintenance game it’s called an ‘EFTPOS machine’ and the building game it’s called ‘Progress Payments’… but the question I want to ask is ‘How many of you are really doing it?’.
Let’s talk EFTPOS machine. With advances in technology, long gone are the days where you need to wait to get back to the office to process a credit card attached to a landline. The portable EFTPOS machine can be carried from job to job, and is now designed like a mobile phone with a SIM card that transmits information through a signal immediately. It’s called serious Money on the Move…
The nature of this, however, like any mobile phone, it does experience the occasional ‘black spot’; an underground garage or a house in a valley. Our team have been know to hold the device in the air to receive a signal to confirm payment!
The portable EFTPOS machine immediately increases cash flow by collecting payment on the spot and as a result reduces the outstanding debt to your company. No more excuses from the customer to pay: with the option to use a credit card or their savings account, and the best part, any credit card that declines can be addressed with the customer face to face.
Hot tip: Don’t be afraid to call your merchant bank after using it for a few months to ask for a better rate. It could be the difference of money in your pocket versus the bank!
For trades where the EFTPOS machine is simply not an option, how do you ensure you still get the money you are entitled to faster? Let’s talk Progress Payments.
Did you know you’re allowed to request a deposit to secure the job and hence get the funds to purchase the materials to start the job? The NSW Home Building Law states if the contract price is $20,000 or less, you can request a maximum deposit of 10%. If the contract price is more than $20,000, you can ask for a maximum deposit of 5%. Could be different in your industry… check it out.
If the job is only a few thousand dollars, it’s acceptable to request Progress Payments from your customer. The rule of thumb is simple: you can only charge for materials and labour already completed.
The remainder of the job can be invoiced on completion. The final invoice should show the full amount of the job, minus the deposit and minus any progress payments received. If you want to prevent using your own funds to outlay for materials in advance, then this method is a MUST to ensure you stay on top of your cash flow.
Using one or both of these methods will improve your business cash flow and ensure you have less outstanding debt. Happy days!
If you’re NOT doing this there is simply No More EXCUSES!
- 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.
Take action TODAY!