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It’s Not Funny If It’s Your Money

18 June, 2020

There are two parts of the cash flow and they’re both important. You need cash, and it has to flow. Cash-hold won’t help; nor will promissory note-flow. Money comes and goes in all sorts of ways, and while there are many ways for clients to pay for your services, bottom line is they still have to pay, so you can pay bills, loans, staff… oh, and yourself.

Obviously there are a few different schools of thought regarding cash management, and not every strategy works for every business owner. But here are some strategies from consultants and contractors.

Tips from the Consultant.
Brandon Lewis of Painters Academy shared his ideas on how to keep the cash a-flowin’

Stay out of debt.
Painting is a quick-pay, cash-flow business. If you need to finance the growth of your business after year two, you are likely doing something very, very wrong and you need to closely analyze your business systems to determine what it is.

Invoicing in residential is unnecessary.
On every estimate, simply write: “Your estimate acts as your invoice.” Train your crew leads to collect payment along with a customer satisfaction survey and dual-column checklist to ensure prompt payment, which will virtually eliminate call backs or invoicing.

On commercial repaints, negotiate payment terms upfront.
Often, institutions and commercial property management companies will pay you within 14 days or less if you request it. If that is in question, make certain to specify it in your proposal. Never be afraid to say no if you cannot float the costs.

Get an SBA-backed accounts receivable line.
Not to be confused with factoring, which can be like payday-lending for painters, ACLs can be a very affordable and safe way to get 80% of your invoices upfront. This process takes a while, so do it early if you plan on going “whale hunting” with your commercial repaint efforts.

Keep an eye on cash flow.
If you use a simple cash-flow projection sheet based on your current gross profit revenue flow minus actual recurring expenses, you should be able to see how much your operational account will grow monthly. Compare this with your actual cash-flow statement to see whether your projections for revenue and expenses are in line. Keep adjusting this until you have a close match with the numbers. When you do this, you’ll know exactly how adding one painter or one recurring expense will affect your bottom-line take-home pay.

Tips From the Front
Our survey of contractors brought out some advice from the folks who… well… need the money. Here’s what they’ve learned along the way.

Jeremy Bramlett, Premier Painting and Services, Muncie, IN:
Pay estimated taxes! This saves you from paying a lump sum and from getting penalties for not paying in enough money on time. I would suggest not to buy equipment and materials on instinct, but to do some research and find the best deals possible. Also, buy only what you can afford and what will truly help your company grow.

David Cook, D’Franco Painting and Wallpaper, Elgin, IL:
We close more jobs by giving on-the-spot estimates and accepting credit cards when we do the loyalty points! Also, don’t wait to learn your numbers – catching up is hard to do when running a business.

Joe Elmore, Armor Tough Coatings, Commerce Township, MI:
I think taking a deposit is a big must for companies to manage their cash flow. When companies get bigger it’s not necessarily needed, but when you get started or you’re running a small company it’s completely necessary, even though you run the risk of people thinking you’re trying to scam them from what they/others experience with bad contractors. Also, we prefer credit/debit card payments. We get paid quicker and there’s no driving around to pick up checks or waiting for the mail. It does have a percentage that racks up quickly, but we try to just accept that is part of our cost of doing business.

Jeff Dupont, Sound Painting Solutions, Seattle, WA:
It’s a lot easier to get paid online [vs. a check]; you get a notification email and you get on with your life. I prefer credit card or ACH. Credit card is cash flow quick, but you pay the percentage fee. I’m happy to wait the week it takes to process an ACH payment so as not to pay the credit card fee. But if they delay, say $21,000, and you want the cash, you lose part of it with the fee but it’s better to get the cash flow.

Erick Gatcomb, Gatcomb Painting & Design, Hancock, ME:
A lot of people – especially those on fixed incomes – simply don’t have $10K on hand to pay for a much-needed paint job. (Remember that a lot of residential repaints are mandated by insurance companies, not by the will of the homeowner.) Offering financing allows them to secure your services, retain their homeowner’s insurance, and add to the monetary and aesthetic value of their home without crippling themselves financially.

All Platform, No Scaffold
There are plenty of platforms that help you get paid and manage your money. Here are a few services offered by some of the most popular.

QuickBooks offers you a chance to see how much money you’re making versus the “bill out and pray” method. Benefits include:

  • Know exactly how much money your projects make with clear reports and dashboards.
  • Track project details such as labor costs and expenses.
  • See profitability based on labor and time costs.

QuickBooks can connect to your bank accounts, credit cards, PayPal, Square and more, and will import and categorize your expenses. You can categorize your expenses and run reports to see how you spend every dollar.

PayPal’sfast pay is why many contractors like it for payment, but it also provides many other services for small businesses. “Send customized invoices that your customers can pay quickly online with a credit or debit card, PayPal or PayPal Credit,” says the company. “Whichever payment method they choose, you receive your money usually in minutes.” It also allows for customer financing where you get paid up-front, which might encourage customers to say yes to your proposal. Paypal provides small business loans of up to $500,000.

Venmo makes it easy to pay, and its social aspect can help boost your business as it connects friends who share what they’re experiencing and buying. “Behind every person who pays with Venmo is a network of friends who can view, like and comment on a shared purchase, bringing your brand front and center in their conversations,” says the company. Plus, it brings millions of users who are already comfortable paying with this platform. You can also use PayPal Checkout to add Venmo as a payment option.

Apple Pay gives your customers an easy, secure and private way to pay in your home, office, within apps, on the web and Business Chat. Customers can use the devices that they have with them every day. “Accepting Apple Pay is faster than accepting traditional credit and debit cards and other payment methods,” says the company. “Within apps or websites, when using Safari, your customers can check out with a single touch.” Many customers find it more secure than traditional credit cards, as you aren’t handling their credit or debit card numbers when they pay with Apple Pay.

Synchrony will work with businesses of all sizes, from local to national, to tailor a credit card program to engage your customers, however they prefer to pay. “We’ve invested in platforms that enable fast credit decisions and easy online payments, and we also offer promotional financing for major consumer purchases, as well as loyalty programs that drive repeat purchases and brand affinity,” they say. They offer private- label credit cards, installment loans and more.

Other platforms contractors are using include Clover Pay, Zellepay, Chase Pay and FreshBooks.

With many choices and philosophies, finding what works may be a result of just “doing business.” Make sure to read the fine print before you engage – and may your cash flow like a river in a rainstorm.

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