CASH FLOW
collection of those payments, which means the money keeps flowing in automatically to your business. “Consider offering payment options to clients,” Chalkley advises. “Obviously, there are bank transfers and cash, but also card payments using Stripe, and spreading payments over three months with a service such as Klarna.” Chalkley suggests that you assess whether services you’re paying for are necessary and bring value to your business. “You may have started using a particular piece of software six months ago,” Chalkley says. “Is it delivering what you really need? Or should you cut that subscription and try something different?” Similarly, you should regularly review your site resources. “Make sure your labour and plant levels allow you to deliver the job with the most efficiency. Don’t keep on additional labour you don’t need, or hold onto hired equipment for longer than you need.” It’s also a smart idea to track your waste and return any unused materials, but be sure that you have an agreement with your suppliers that allows you to do so, Chalkley warns. When it comes to your suppliers, Chalkley says there is value in using your supply credit terms. The best way to do this is to negotiate with suppliers and make full use of the credit card. “Pay them on time, but not too early. That is good for relationships and for your credit rating.”
How the FMB is supporting you The FMB has updated its suite of contracts to improve cash flow by: ● Changing payment terms to a default setting of 14 days but this can be set to whatever period you choose ● Increasing the number of stage payments you can enter in the contract ● Upping the interest rate on late payments from 5-10% ● Adding clauses in the contracts to manage changes. so you’re on top of your data. And remember to set your prices . “Make sure your pricing includes your overheads, not just direct project labour, plant and material costs, but also advertising, office payroll, insurance and accounting costs,” Chalkley explains. Choose the right pricing method: ● Cost plus contract – carries value for risk ● Fixed price contract – carries more risk ● Day rates – better because there’s no risk. “Market rates will affect your pricing,” Chalkley says. “Get everything in writing; confirm verbal instructions as quickly as possible in writing. Importantly, you need to send your invoices on time and be clear about your payment terms. In your contract you can charge an interest on late payments or even charge a penalty. “If your invoice is clear and detailed, it’s unlikely to be challenged by the client,” Chalkley says. “If you set up everything you’ve included and it complies with the contract, there is nothing the client can challenge you on, which speeds up payment.” If you have recurring jobs then you should consider automating your invoicing for payments. Chalkley says cardless services such as Stripe simplify
Set up savings pots Creating multiple savings pots for
different costs can be a helpful way to ensure your cash flow remains healthy. When the time comes to pay VAT, PAYE, corporation tax or personal tax, the relevant savings pot has money to help you pay what is required. Chalkley says to allocate a percentage of each invoice payment to the relevant savings pot. Ultimately, builders need to “expect the unexpected”, Chalkley warns, and they can do that by having a risk contingency that enables them to deal with any unforeseen financial challenges.
full picture. It lets you know where you are now but not in the future. So you need to forecast your finances , ideally with a 12-month look-ahead period. To do this effectively, your data needs to be accurate and up to date. Detail your data to job or sub-project level in your forecast so you can plan for particular supply payments. Find a system that works – whether it’s bookkeeping software – Xero, QuickBooks or FreeAgent – spreadsheets or a notebook. Be regular by carrying out bookkeeping duties two to three times a week
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Master Builder
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