Leaking money – there’s a hole in my business

Tony’s plumbing business has gained a great reputation among local residential customers as well as the local municipality in his town. Tony provided his 25 trades with great benefits, their own trucks and he prided himself on how well he looked after his extended family.  But Tony always struggled with money – although he earned a lot, the cash never seemed to stick to his bank account and yet year on year his accountant happily reported he was profitable, and Tony dutifully paid his taxes. Tony just couldn’t figure out how to get ahead of his cash flow and create a nest egg of his own – Do you relate?

Tony decided to get to the root cause of his money challenges by first learning how to read and understand what his financial statements were telling him.  He learned that his customers were actually taking 90 days to pay his bills even though his accounting system said otherwise.  Tony realized that his accounting team wasn’t invoicing customers right after the jobs were done – these delays caused numerous problems. Not only were invoices going out late, there were errors on the invoices and some jobs were being underbilled because not all the work was reflected on his invoices. All of these issues caused delays in collecting money from clients.  But worse still, Tony realized that supply prices were creeping up and he hadn’t adjusted his prices properly – no wonder his plumbing business was draining money! Now with a clearer understanding of the issues he was face, his accountant helped Tony develop a cash flow. This tool allowed him to customize and project how cash would enter and leave his business, as well as allowing him to adjust for future changes. Armed with this new tool, Tony was able to better manage his money moving forward and build the nest egg he needed.