By Joe Salemi cash flow savvy business owners
Most small to medium sized professional landscape businesses do very well in their technical skill-sets, yet running the business often presents challenges outside of their comfort zones. They often struggle because of poor cash management skills, or at least because of a lack of understanding of how to effectively manage cash flow – not letting it manage them.
Next to fraud, competition, and poor economic conditions, this is THE reason landscape businesses struggle or fail.
Take all of this and add that it is a significant source of stress. Ahhh!! It makes sense, you have employees, equipment, contracts, office space with overhead and people that depend on you to make their living and the money just isn’t coming in at the right time to take care of payroll or your vendors. More than ever, a foundational business skill is managing positive cash flow.
Here is some great advice I’ve received over the years of observing and working with high performing landscape companies and cash flow savvy business owners all over North America:
- Monitor cash flow closely – keep a close eye on bank balances, sales opportunities (in progress/won/lost), accounts receivables, inventories, payables, and credit card terms. All of these wrapped together give you a great sense of the financial health of your landscape business.
- Make frequent projections – take a look at what invoices have been sent out and their terms. Ideally, you’ll have a customer rating system based on how well they pay so you’ll be able to have a quasi–accurate way to project when cash will come in.
- Prepare a thorough, accurate cash flow forecast – consider historical sales, payment histories, industry averages/trends, current economic conditions. The more you can do to forecast your cash flows and benchmark, the better you can plan in the event that slow–downs or clogs in the pipe start to build up.
- Identify issues early – you have a client that is taking their sweet time to pay – don’t be afraid to ask for your payment! I see it all too often that landscape business owners feel awkward or uncomfortable asking a client to pay their invoice. Don’t sit on in it, don’t wait ‘til later to “work on it”. Fix it when you find it and keep the pipeline of cash flowing.
- Have a back up plan – in much of the US and Canada, the landscape business is extremely seasonal. And, well, so is cash flow. Give some hard thought to how you’ll bridge the gap between good times and hard times. Well–established professional landscape businesses build reserves. Strong start–ups have well-backed lines of credit that support their work and growth. If you know there’s going to be a gap in the flow of cash, it may be time to establish an off-season service you can provide to your existing clients (or new ones), allowing you to be revenue–positive on a regular basis.
- Grow carefully and be measured – it often takes money to make money, but overachieving and uncontrolled growth can (and likely will) send you into an unrecoverable tailspin. Have a solid business plan that outlines the strategic direction you want to progress towards. Develop objective key results (OKRs) that will keep you laser–focused on achieving your goals (dreams).
- Invoice quickly – any delays in getting invoices to clients means a delay in getting paid. This should be a priority for you (or preferably for your office admin professional). Have regular, dedicated time set aside to invoice your clients for the work and services you provide.
- Use technology wisely and effectively – if you’re not using an accounting software package, well shame on you! I’ll assume you are and you’re using it to manage your A/R. Focus on the clients who have exceeded (aged) more than 20 days and work to remind them to get their payments in. Invest in a landscape business operating system that allows you to tie invoices directly to the job, and will have them generate automatically for your routine maintenance clients.
Cash flow struggles are real, but don’t let them loom over you like the ominous clouds and weather systems that have delayed the start of the season for much of North America. If you aren’t as financially savvy as you’d like to be, surround yourself with people that are and learn from them. Ensuring a steady flow of earned revenue is coming into the business is just as important as ensuring the crews complete their projects on time and on budget.
Let us show you how Manage360 can help you manage your cash flow effectively and efficiently.