Like many other businesses affected by seasonality, roofing companies often struggle with irregular cash flow. Bad weather that keeps your team from starting or finishing roofing jobs, reduced demand during winter months, and regional economic trends that make homeowners reluctant to spend can all slow down business for your roofing company. That’s why it’s so important to carefully manage your cash flow. Here are eight tips to help.
- Look ahead. Start by planning for the future. Create a cash flow forecast that carries over for the next 12 months. To do this, use historical cash flow data from past years, as well as your sales forecast for the next 12 months. Of course, no forecast will be absolutely accurate, but going as far as you can toward anticipating future income and outflow will help you more effectively manage your roofing business’s cash flow.
- Choose the right suppliers. The cost of materials and equipment for a roofing job can make or break your cash flow. Look for suppliers that are not only reliable and affordable, but also offer flexibility in terms of payments. For example, can you negotiate with a vendor to pay for materials in monthly installments, instead of all at once? Or perhaps you can make larger payments during your busy season, when your income is higher, and lower payments during the off-season. In the long term, selecting a supplier who is willing to work with you on payment options is more important than choosing one that offers rock-bottom prices.
- Carefully manage payments to your subcontractors. As with suppliers, try to strike terms with subcontractors that allow you to spread out payments in a way that’s advantageous. For instance, instead of making lump payments less frequently, could you make smaller payments more frequently? Alternatively, if you want to reduce the frequency of payments, larger payments during your busy season could be more affordable than regular payments that nibble away at your cash flow.
- Accept a variety of payment methods. Are you still writing invoices to customers, mailing them and waiting for the check to come back in the mail? If so, you’re adding weeks to the time it takes to receive payments. Even if customers pay by checks on the spot, you still have to wait for the check to clear. Instead, send invoices electronically, accept payment electronically or, for smaller amounts, consider accepting credit card payments.
- Practice good project management. Using project management software makes it easier to keep track of progress on a roofing job in real time—especially if you choose software with a mobile app. Monitor daily progress and measure it against your projections for how long the job will take. Also keep close tabs on the hours your subs and employees work—this helps you avoid getting hit with expensive overtime costs.
- Use job costing. When your company is working on multiple roofing jobs and purchasing materials in bulk, it’s important to track exactly what materials are used on what job. Job costing ensures you properly allocate expenses, including materials, equipment and labor, and income to each specific roofing job. After a job is completed, reviewing the job costing data will help you make sure you’re pricing adequately to make a profit.
- Carry as little inventory as possible. As your slow season approaches, take inventory of the materials you have on hand. If you know you won’t need all of it in the coming months, selling unused inventory can accelerate your cash flow while also eliminating the costs of storing materials.
- Follow up on late payers. Invoicing in a timely fashion and accepting multiple payment methods helps accelerate your income. However, you still need to stay on top of payment due dates, and immediately follow up with customers who don’t pay on time. Being proactive is the best remedy to maintain healthy cash flow.
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