If you operate a business, you probably know the value of cash flow. Without it, you will have trouble running your business and providing services to your clients. Within the electrical industry, maintaining proper cash flow can be more challenging because of irregular payments from some customers. Sometimes small businesses happen to be the last ones to receive compensation, especially if the invoice received is for a large amount as it can typically be for electrical services.
In this article, we shall share some tips for electricians to better manage their cash flow throughout the year. We shall explore how electricians can support themselves during significant and unexpected financial hardships and better adapt to fluctuating market conditions.
Identify delays and set boundaries
Clients can be unreliable and unpredictable in making timely payments for electrical services. Research indicates that in Australia, the average time that it takes a customer to pay an invoice is 45 days. Keeping this in mind, it is vital for you to plan ahead and think about how you will effectively manage payments.
The first step is to know your consumers well. Try to find out which clients value your efforts and services most and make regular and quick payments upon delivery of service. If you routinely have unpaid bills from a particular individual or company, that puts your cash flow at high risk. Identify these clients and then refuse to work with them in the future. Instead, spend more time working with clients who value your work since that would be a more efficient use of your resources.
Another way to address this problem is by setting firm boundaries with your clients. Make it mandatory for every customer to pay you within quick time periods (such as 10 days instead of 25 days) of completing your service. In that manner, if people take advantage of you and procrastinate until the last day, you will still not be waiting for a long time to get compensated.
Many electricians have faced the issue of customers retracting from their agreement after asking for electrical services. You may have already invested in materials, set time in your schedule, and held off other appointments when your customer tells you that they do not need your services. Considering such instances, you could require every client to pay a deposit amount prior to beginning work. This will help maintain your cash flow and prevent extreme financial losses.
Ensure that your customers are always reaching out to you
Making sure that cash keeps coming in consistently is the key to optimising cash flow. This can be achieved by making sure you stay well connected with your customers, both old and new.
As an electrician, it is important to spread wide awareness about your brand and services so that when electrical services are required, you are the first electrician customers get in touch with. You can build your brand by using both digital and physical means.
Establish a well-functioning website and be active on social media channels. Offer discounts to your regular clients and send occasional email updates with special maintenance deals on servicing. You can also give your customers a call or visit them and talk about your offers.
Staying in touch with your customers regularly will help them remember you. Doing things such as sharing tips on how to take care of electrical appliances, etc., which are outside of your regular job, helps make client relationships non-transactional. This will allow more people to know about your brand. You can take this a step further by offering rewards such as this: “Refer a friend and get 5% cashback on your next service.”
Offer excellent service and make processes simpler
The success of any trade relies on the delivery of exceptional service. As an electrician, make sure that your services are of high quality so that your customers feel motivated to keep coming back to you. Also make sure your work, equipment and any employees are protect with a public liability insurance plan.
In addition to services, it is advisable to have easy, uncomplicated logistical processes. The smallest details can have a huge impact on how a customer perceives your work and whether they would be willing to contract with you in the future. For instance, make sure you have easy-to-read invoices. Sometimes invoices can be a bit confusing to decipher. Make sure that every task and its corresponding fee is clearly mentioned so that your customer is able to distinguish between them. Itemised receipts are helpful not just for the client but also for your records.
Whether you are working as an independent contractor or running a company, make sure you are regularly monitoring your operations. Give close attention to significant expenses and see that you are receiving timely reimbursement. Notice how cash flow patterns change throughout the year. Based on your observation, have a plan in place for managing things like major expenditures and periods of quietness.
Source
Strode, Chris 2018, Optimising Cash Flow as an Electrical Contractor, Industry Update Guest Editorial, viewed 4 January 2021, <https://www.industryupdate.com.au/article/optimising-cash-flow-electrical-contractor>
