12th February 2016
One in four businesses fail due to issues with cash flow. In order to reduce the impact cash flow issues can have on those within field service industries, we've compiled a list of measures you can take
Even a profitable and growing business is not immune to cash flow complications. According to Pymnts.com, around a quarter of businesses have short term cash flow accuracy of less than 70%. Cash flow can be affected by issues ranging from customer’s not paying, economic recession and equipment breakdowns. However, there are preventative measures you can take.
Ways to reduce cash flow issues…
Reduce costs- Reducing unnecessary costs should be a priority when addressing cash flow. Travel expenses is a good starting point. Consider negotiating rates with hotel chains and introduce fuel cards for staff. If you have vehicle tracking, you can even identify idling drivers, as this can have a significant impact on expenses by wasting fuel, as NextTraq.com explain.
Automate invoicing- Automating processes such as invoicing and chasing overdue bills can have a significant impact on cash flow. An article on MyCustomer.com states, “An automated system will help you to reduce your invoice cycle time by as much as 80%...” It’s imperative for field service industries to invoice customers as soon as a job is completed. “Technicians often jot down job details on a piece of paper and put it in their back pocket, intending to log that information as soon as they can get around to it,” says Dave Hart, vice president of global customer transformation at ServiceMax. “That could be the end of the day, the end of the week — or never.”
You can equip your staff with instant access to the right customer information just as FieldService.com recommend, “The solution is to empower your techs to record and close work orders in real time while on-site, with the ability to generate courtesy invoices on their mobile devices. Your customers can then sign-off electronically and approve the work done, parts used and labor time spent.” The customer can then be invoiced straight away.
Identify bad payers- Set out and record supplier and customer payment terms and monitor irregularities or delays. Before taking on new customers and working with new suppliers, be sure to check their credit score. This will give you visibility of their financial position, whether they have money in the bank and whether you should ask for cash up front.
Cash flow forecasting- To create an accurate forecast you need to record all incomings and outgoings, factoring in fixed and variable costs. Software solutions that provide business intelligence and reporting tools, such as NAVservice, are ideal as they can analyse the data you have and provide an accurate picture of your cash position.
Manage stock effectively- If your money is tied up in stock you may not be able to pay suppliers or deliver essential services, which can result in a declining customer base and financial complications. To ensure you have stock available, but don’t tie up too much cash in it, you should reconcile your stock records, just as you would reconcile your bank account. To ensure you’re in a good position, you should sell obsolete, discontinued or damaged inventory, and reduce slow moving inventory.
Maintain service levels- According to Bain & Company, acquiring a customer can take longer and cost up to seven times more than retaining an existing customer. Therefore, it’s vital to maintain service levels and retain the customers you have. What’s more, building strong relationships can lead to ongoing custom and upsell opportunities. As explained on thebusinessowner.com, “You have a built-in advantage over your competitors who are working hard to lure them away. Invest in your relationships with your customers.”
A complete view
Following these steps, provides you with the required visibility to minimise the impact cash flow issues can have. What’s more, it will position you above your competition, since, “More than 90 percent of companies across the Europe, Middle East and Africa region don’t have a transparent view into their cash flow.”