Cash Flow Management to Grow Your Landscaping Business
By Matthew Gillman
We all know that cash is king. Those who have enough working capital to sustain their business are generally more resilient and better able to thrive in fluctuating market conditions. That said, it’s not enough to simply have the money. You must know how to manage it.
Having an effective cash flow management system is indicative of a flourishing landscaping business. You need to fully understand the inflow and outflow of your money to avoid suffering from ceiling-high debts, customer distrust, or even bankruptcy.
A healthy or positive cash flow is one of the most critical elements for your business’s sustained growth. It reflects that you have more cash flowing into the company than out of it. It also indicates that even when you’re spending money, you’re actually investing it on expansion to grow more revenue.
No matter how big or small your landscaping business is, you’ll need good cash management practices to thrive in a competitive market. If you’re looking forward to improving your cash flow in 2022, here are some of the most effective tips with which you can start.
Outsource your tedious tasks
As a small-business owner, you may be managing nearly every aspect of your operation from customer bookings and inventory to payroll and accounting. Instead of spreading yourself too thin by trying to wear every hat, outsource some of your administrative tasks to outside professionals so you have more time to focus on bigger-picture goals.
For example, if you don’t have the funds to hire a full-time bookkeeper on staff, you can hire a freelance bookkeeper to balance your books as needed and keep your taxes up to date. The design of your company website and the management of your company’s social media accounts are other examples of jobs you can outsource or hire parttime employees to handle.
These types of tasks, while time consuming, bring value to your company. Outsourcing professionals to handle them for you allows you to embrace the value they bring while also having the time to focus on the more crucial aspects of your business.
Build strong relationships with suppliers
When it comes to deals with vendors, nothing is set in stone. Building strong relationships with your vendors and suppliers gives you leeway to negotiate more advantageous terms such as bulk rates, discounts or waived delivery charges.
The best way to build these strong relationships with suppliers is to continually prove you are financially reliable. Simply put, pay on time. Your suppliers are business owners too; and while you want to negotiate terms that work in your favor, you have to do your part in delivering on your commitments.
Use accounting solutions
Knowing your company’s operating cash flow will go a long way in improving your business’s financial standing. If hiring or outsourcing an accountant and a bookkeeper isn’t necessary for your company, you can choose to equip your business with accounting solutions instead.
Accounting tools such as QuickBooks Online, Wave, and Xero are ideal for small businesses that need a hand in monitoring their cash flow, preparing payroll, or managing taxes. Some tools like Plooto will allow you to automate your accounts payable and receivable, as well as personalize your customers’ invoices.
In 2017, Business Insider cited a study by a U.S. bank concluding that 82% of small businesses failed due to cash flow mismanagement. To keep your business from suffering the same fate, it’s important to carefully monitor and track every penny you earn, spend and save.
Manage inventory and storage
As your business and customer-base grows, you may need to revisit your inventory. You’ll need to make sure you have enough supplies for fluctuating seasons.
If you’re seeing an increased demand in your landscaping business, you may want to consider purchasing supplies in bulk. Stocking up on supplies – particularly on commonly used items such as soil, mulch and stone – will ensure that you are always prepared and allow you to save on costs. You can then put those savings toward other purposes such as purchasing safety gear or increasing your marketing ad spend.
Equally as important as having enough inventory is knowing how to properly store it. For example, fertilizers need to be stored and managed separately from other chemicals to prevent hazardous reactions. If all your products are stored in one place without a secondary containment, you’ll not only damage your equipment and waste your product, but you could also expose yourself and your employees to potential health risks.
Increase service prices
Factors such as industry growth and fluctuating prices of goods often dictate whether it’s time for a business to raise its prices.
As pandemic safety measures eased in 2021, many small businesses raised the prices of their goods and services to make up for lost sales. Price markups don’t always have to appear as a price increase. A company could keep the price of their product the same but reduce its size to sell more, or resort to cheaper packaging to reduce production cost.
If there’s no way you can reduce your expenses without compromising your customer service, the only option you have is to increase your fees. Things like penalty fees for late payments or charging an additional sanitation fee could help close gaps in your cash flow. There’s always the worry that this will put off some of your customers, but sometimes it’s the only way to keep your business running and remain competitive in the market.
Offer discounts and freebies for long-term engagements
One of the best things about running a landscaping business is that lawns need routine maintenance. Many people don’t have the time or equipment to execute this upkeep by themselves, thus creating a solid demand for your services.
Loyal clients can be key to maintaining a steady cash flow, so why not consider encouraging loyalty through rewards and incentives. Something like a subscription service for clients through which they’ll receive weekly or monthly upkeep at a discounted rate.
With this arrangement, the customer is assured that their lawn will be routinely tended to at a cheaper rate, and you (the business owner) are assured a steady source of income.
Pay off debts as soon as possible
Here’s the ultimate key to financial success: always pay off your debts on time. In life or in business, you need to make sure you don’t lag behind your credit card bills or loan repayments. Failing to do so leads to interest charges, which hurt your cash flow.
Remember that getting business credit cards or taking out a loan will be beneficial to your business, especially when you manage it well. If you know you can’t pay for more expenses at the end of the month, try not to use your credit card. Not only does it charge you more, but it will also affect your credit score.
Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.