MPAQ presentation of how to improve the cash flow in your plumbing business.

1. Cash Flow - The Cornerstone
of Your Business

2. Welcome…
• Relax
• Be Open – take notes, ask how?
• Participate – share
• Link to slides – slideshare.net/tradeinsights

3. Top 7 Key Frustrations for Many Trade
Businesses…
1. Working too hard for little/no remuneration
2. Working under too much stress/pressure
3. Too much time in the business – missing out on family
and lifestyle
4. Staff issues
5. Inconsistent work/jobs
6. Chronic cash flow
7. Constantly chasing their tail – no let up!

4. Over the lifetime of a business…
• Only 39% are profitable
• 30% break even
• 31% lose money

5. Challenges…

6. Does it get any easier?

7. To think about…
• If you don’t understand your numbers you don’t
understand your business.
• Understanding vs. Doing
• Mange your money wisely and you will have more
money to manage.
• 80/20 – Emotion vs. Mechanics

8. The Oh C&%# moment!

9. What are the consequences?
• Stress – Loss of Sleep, Relationships
• Reputation/Integrity
• Staff leave
• Credit rating
• Insolvency/Closure
• Bankruptcy

10. Example –Pre Awareness
Day 1 - Get the job
Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account)
Day 11 - Complete the job & pay the team
Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days
Day 44 - Receive payment from client
This equates to possibly 37 days negative cash flow

11. 1. Understand the causes
2. Create a cash flow philosophy
3. Create separate buckets
4. Get super profitable
5. Increase money coming in
6. Delay money going out
7. Prepare for shortfalls
The Steps to Take…

12. 1. Understand the causes?
• Poor Awareness/Money Management
• NO measurement/understanding
• NO cash flow projection
• Unaware of break even
• No cash reserves

13. 1. Understand the causes?
• Declining sales
• Declining profit margins
• Not charging enough
• Too much WIP (Work In Progress)
• Poor efficiencies/inefficient team
• Poor Productivity/Focus

14. 1. Understand the causes?
• Delays in getting money in
• Delayed invoicing
• Poor payment terms
• Bad choice of clients
• Paying suppliers too quickly
• Overheads too high
• Poor business model

15. What is NOT the magic solution?
More income is NOT the magic solution –
sometimes just the same challenges with
more zeros!

16. 2. Philosophy…
• Belief System (B.S.)
• Focus
• Philosophy
• Psychology
• Money flow and allocations

17. 3. Managing the flow…
A suggestion…
Gross Profit
(Real Income)
Pay Your Profits 5- 10%
Group Tax, Super, GST
Training – You/Team 5%
Team Wages – including you
Essential Running Expenses
Non-essential Suppliers
Cash Surplus

18. 4. Increase Profits
• Get more clients/customers
• Increase average job value
• Increase prices/charge out
• Add MASSIVE value = Repeat & referrals
• Increase efficiencies/productivity – track & measure
• Let go of non performers
• Select better customers/sack slow payers

19. 5. Get Money in Faster
• Firm up payment/trade terms with customer
• Deposit - use mobile payments/EFT
• Progress payments
• Invoice/Payment on completion - Mobile payment/EFT
• Make it easy for clients to pay
• Incentivise to pay early/on time
• ASK if necessary
• Invoicing/debtor system

20. Automate…

21. • Take full advantage of terms – don’t pay too soon
• Negotiate payment terms with suppliers
• Communicate always – if there is going to be a delay
• Review ALL expenses quarterly
 Insurance
 Electricity/Phone
 Salary/HR – Get or Keep
6. Delay Money Going Out

22. 7. Prepare for shortfalls
• Not if, when
• Apply for overdraft/credit in advance
• Credit card

23. Example –Pre Awareness
Day 1 - Get the job
Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account)
Day 11 - Complete the job & pay the team
Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days
Day 44 - Receive payment from client
This equates to possibly 37 days negative cash flow

24. Example –Post Awareness
Day 1 - Get the job and receive 10 % deposit
Day 7 - Start the job - Buy materials (50% COD, 50% on 7 day account)
using deposit from client and request payment of materials before
ordering (on arrival)
Day 11 - Complete the job, Invoice client - (receive payment on
completion or 7 days), Pay the team
Day 14 - Pay for balance of materials (50%) – out of client payment
(Day 18) Worst Case - Receive payment from client
This equates to a +ve cash flow or just 7 days negative cash
flow (for only 50%)

25. Get a great team around you
• Book keeper
• Accountant
• Coach
• Mentor
• Peer Group
• Never stop learning

27. Day to day?

28. Who is PROTRADE United?
We believe in a united effort and collective knowledge
to help you find an even better way to run your
business…
Trade specific solutions in…
• Strategy – income, cash flow, profit, team development
• Accounting – financially well organised
• Marketing – online & offline
• System Integration – streamline IP into the cloud & protected

29. Why PROTRADE United?
Ultimately for 3 reasons…
1. To give you the luxury of an unhurried life
2. To raise the standards of trades and related
service businesses around Australia
3. Decrease the anxiety and depression related
deaths amongst trades business owners

30. Some of our clients…

31. Participant or Spectator…?