Cash flow surveillance: A key aspect for successful pool contracting

by jason_cramp | March 15, 2024 4:49 pm

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Photo ©BillionPhotos.com/courtesy bigstockphoto.comBy Grant Harrison

As a pool contractor, managing the financial aspects of a business is crucial to its success. One of the most important, but overlooked, aspects of financial management is monitoring the cash flow. By keeping a close eye on the cash flow, pool contractors can avoid unexpected shortfalls and ensure there are funds to meet their business obligations.

This article outlines the five cash flow mistakes that small business owners often make and how they can avoid them. By implementing these strategies, business owners can effectively manage their cash flow and set their pool contracting business up for long-term success.

Neglecting to monitor cash flow weekly

One of the biggest mistakes small business owners make is not consistently monitoring their cash flow. By neglecting to review their cash flow on a regular basis, they may miss out on potential problems that could eventually drain their financial resources.

Monitoring cash flow on a daily or weekly basis allows business owners to stay on top of their numbers and gain a clear understanding of the money going in and out. It also helps them catch any overdue payments from clients, which is essential for maintaining the financial health of any business. By staying on top of cash flow, business owners can ensure they have the necessary funds to pay the bills and meet any financial obligations.

Spending too much, too soon

When starting a pool contracting business, it can be tempting to spend too much money upfront on expenses such as equipment, office space, and staffing. However, overspending in the beginning can put a strain on the cash flow and make it difficult to cover expenses during slower months. An example of this would be purchasing versus renting equipment or vehicles, especially in the beginning. Renting allows business owners to return an item when it is not in use or in the off-season, and eliminates the monthly cost of the purchase.

To avoid this mistake, it is important to keep overhead and operating expenses as low as possible in the early stages of setting up a business. Take a close look at every area of the business that costs money and separate the needed items from the wanted. If one finds that they are overspending in one area, there is a good chance they are overspending in others as well.

If the business is already committed to loans or leases, consider exploring other options such as renegotiating with lenders. In addition, look for ways to cut expenses and free up cash, such as switching to a bank with lower fees. By keeping all expenses in check, business owners can ensure their business stays cash positive.

Not maintaining cash reserves

Every business faces unexpected challenges and cash flow shortfalls at some point. Hence why it is crucial to maintain several months’ worth of cash reserves to weather these storms.

When faced with an unexpected shortfall, many small business owners resort to tapping into their personal savings or assets to cover their business expenses. However, this can create a vicious cycle that leaves them worse off financially than before.

Instead, it is best to maintain a cash reserve that is large enough to cover unexpected expenses during slower months. This way, business owners can protect their business and personal finances. It is important to strike a balance between maintaining a cash reserve and investing, as one does not want to tie up a large amount of money without making a return.

Missing out on investments to grow wealth

Investing is an essential aspect of growing one’s wealth and securing their financial future. While the primary focus may be on running the pool contracting business, it is important to not overlook the benefits of investing. Here are some basic tips for investing:

• Start investing as soon as possible—Business owner yet or not, one does not need a large amount of capital to start investing. Even if they start with a small amount of money, they can benefit from compound returns over time.
• Diversify the investments—Consider investing in a variety of industries and sectors to reduce the overall financial risk. If some investments are performing poorly, it possible to still see a return from investments (ROI) in other areas.
• Take advantage of registered savings accounts—Registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) offer tax advantages that can help business owners grow their wealth overtime. Contributions to RRSPs are tax-deductible, while TFSA contributions and investment income are tax-free.

By investing wisely and diversifying their portfolio, current and future business owners can grow their wealth while running their pool contracting business.

Not hiring an accounting and tax specialist

As a pool contracting business becomes profitable, it is crucial to hire an accounting and tax specialist to handle the books and finances. Managing one’s own financial tasks can be time-consuming and overwhelming, especially if they lack the technical knowledge.

A skilled bookkeeper will track all the accounts and keep the financial records in order. Further, an experienced accounting and tax specialist can help business owners analyze their financial data and make informed business decisions, such as knowing when they can afford to hire more people or purchase another vehicle or piece of equipment. These professionals will optimize on tax return, ensuring the business pays less tax and avoids penalties and interest.

By delegating these tasks to professionals, business owners can focus on running their pool contracting business while ensuring their financial obligations are met accurately.

In conclusion, monitoring the cash flow and avoiding common cash-flow mistakes is crucial for the success of a pool contracting business. By consistently reviewing the cash flow, keeping all expenses in check, and maintaining cash reserves, owners can set their businesses up for financial stability and profitability, while making their life less stressful.

[2]Grant Harrison has been in the landscape/contracting industry for more than 30 years. He has worked for small and large businesses and owned his design/build business. Now he takes the knowledge and experience he has gained and shares it with other contractors to equip them to build sustainable and profitable businesses and to enjoy the process as well.

Source URL: https://www.poolspamarketing.com/trade/features/cash-flow-surveillance-a-key-aspect-for-successful-pool-contracting/

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