As with any other business in any other industry, improving, growing, and succeeding long-term with your earthmoving small business requires that you have access to cash. It is no over-exaggeration to state that cash flow most certainly is the lifeblood of a small business.
While the phrase, ‘cash is king’ is popular within small business communities, the argument can be made that it’s actually cash flow that is king for small business owners. Without steady cash coming into your earthmoving small business, you’ll likely be left fighting an uphill battle to grow an earthmoving business in quick time.
A cash flow management guide for earthmoving businesses
Any serious list of earthmoving business tips will often start with the topic of cash flow management. Steady cash flow is essential for growing a business; it’s a key ingredient in sustaining a small business, as is business insurance.
The reality for small business owners is that doesn’t matter how much cash is coming into your earthmoving business in the future if you don’t have enough money on hand to get from the present to the future.
You still need to pay your employees, pay your rent (if you don’t own your business premises), pay suppliers, and service any business loans your business may currently have. So, let’s look at some proven earthmoving budgeting tips to improve your cash flow and help you to manage the finance for earthmoving business.
1. Increase your sales frequency
While there are a few different ways to slice it, one simple way to increase your sales frequency is to invoice your clients more frequently. While clients may appreciate – and indeed require – longer payment terms, there’s no real reason to wait for the end of the month to roll around or until a project is completed to invoice clients.
It’s important to discuss any changes to payment terms with your clients before surprising them with progress payments they weren’t expecting. It may be in your interest to ask permission to request a progress payment from your clients – carefully explaining why you wish to move them to a progress payment arrangement.
Another option is to nominally increase your prices at the start of every financial year, putting it down to the rising costs of doing business. This is a common pricing tactic in business.
2. Collect your receivables faster
While on paper collecting your receivables faster makes complete business sense, this is something that isn’t always practiced as often as it perhaps should.
It may occasionally feel like you are pestering your clients, but keep in mind that you are doing what’s best for your earthmoving small business – which is your main concern as an earthmoving small business owner.
So don’t feel scared or bashful about following up with your debtors to get your outstanding payments settled on time. On that note, it’s okay to ask for early payments on invoices, however, you may need to consider introducing a discount for clients who agree to pay their invoices early. While not ideal, this can help you manage cash flow for your earthmoving business.
3. Defer any tax payments
If your earthmoving small business is up to date with all of its tax payments and obligations with the ATO, there may be some leeway for your business when it comes to meeting your GST payments and income taxes. You may be able to negotiate preferred payment terms (such as instalment payments), which can help you to better manage cash flow for your earthmoving small businesses.
4. Defer creditors payments
Many suppliers may be very reasonable if you require more time to pay them. The key here is being open and honest with your creditors; after all, misleading creditors isn’t great for building trust.
5. Sell and leaseback fixed assets
The selling and leasing back of your fixed assets is another creative way to access cash flow when your earthmoving small business really needs access to capital.
Certain finance businesses offer a service whereby they purchase your unfinanced earthmoving equipment from your small business and then lease it back to you. This can be a great way to deliver an injection of capital for your business when it most needs it.
There are specialist companies that provide this type funding; they buy your unfinanced equipment and lease it back to you, providing a capital injection. You may also consider selling off any equipment or assets that are no longer used to create additional cash for your earthmoving business.
At BizCover we help earthmoving businesses just like yours to compare competitive quotes for insurance* for earthmoving and excavation businesses fast online so they can get the covered and get on with their day without any drama. While BizCover gives you the power to buy business insurance online in 10 minutes and get on with the job at hand, we’re always up for a chat. Call us on 1300 920 864 to discover how we can help your business.