As an owner of a plumbing business, you juggle several things at any one time. Between managing employees, scheduling customer jobs, tracking inventory, competing with other plumbing companies, and marketing your business, managing your plumbing company’s finances can seem overwhelming. However, tracking and balancing your finances regularly can be the difference between ending up in the black or falling into a hole at the end of the year. Below are six of our top tips for better managing your plumbing company finances. Put these tips to use and you'll breathe a little easier when an unexpected expense comes your way.
The first step for balancing your financials is to get an understanding of what you bring in and what you pay out. Expenses like gas, wages, insurance, utilities, supplies, and other overhead costs need to be itemized and accounted for in your expenses. In planning a budget, it is far better to over budget and have an excess of profit than it is to underestimate and end up owing money. If you have a recurring expense that can vary in amount, estimating on the high end can help you ensure that this expense is always covered.
Set revenue goals and plans to reach them
When examining your budget, compare the money that comes in against the money that goes out. Apply some simple logic to make this balance work. If you experience an increase in expenses, you'll need to also increase the amount of money that comes in. When balancing your books, make note of positive and negative trends in expenses and revenue. Know what your sales and revenue goals need to be for your company to stay on track and remain profitable. Once you have those numbers, plan your strategy for hitting them, whether that means updating your pricing, boosting your marketing efforts, or increasing the efficiency of your operations.
Plan large purchases in advance
A large, unplanned expense can devastate your budget when you least expect it. Company vehicles break down, office equipment becomes obsolete or falls into disrepair, and you must constantly expand your toolset and technology as your plumbing company grows. Planning ahead using up-to-date financials and profit projections can help balance your risk when big expenses come up. A little planning prevents these large investments from feeling like huge burdens.
Invest in accounting software
When your company first starts, it's easy to keep handwritten records or maintain a spreadsheet of paid invoices and paid bills. However, an uptick in volume can cause these rudimentary systems to quickly fall off the rails. Investing in an accounting software application can help you keep better track of your financials and stay organized. Software solutions such as QuickBooks, Zoho, and others are popular among plumbing company owners for their user friendliness and accessibility. Some of these solutions, such as QuickBooks, integrate with third party add-ons to help manage other aspects of your plumbing company. These include scheduling your plumbers, equipment tracking, routing, and more. QuickBooks plugins such as Smart Service help you manage your plumbing business in one place—making it not only easy to track financials, but also to schedule out your service calls.
Keep financials up to date
As your plumbing company grows, your budget will change. Setting aside time to review your financials and update your accounts is crucial to staying on top of your plumbing company’s success. Audit your financial information monthly and make sure that you track and record expenses accurately so that you can make sound financial decisions. Staying on top of this information monthly also helps when it comes time to close out the books at the end of the year. Backlogging under a time crunch puts you at risk of missing important information that can negatively impact your taxes and year-end statements. Review your financials every month, and you'll have plenty of time to make month-over-month comparisons, as well as year-over-year comparisons, helping you spot seasonal trends and track your growth over time.
Understand how seasonality impacts your business
The plumbing market can be influenced by a number of outside variables such as location, weather, and holidays. Tracking both positive and negative trends in phone call volume, service requests, and types of service requests can allow you to make forecasts as you go into different seasons. Typical seasonality factors that impact a plumbing business include holidays in which people host large gatherings, cold weather that can cause pipes to burst, home buying season, new construction season (in which new plumbing is needed), and periods of increased rainfall (which can lead to basement flooding). If you know that a busier season is coming, schedule your plumbers accordingly and make sure you have all the supplies you need to meet the demand. For slower seasons, make sure to scale back your costs where possible.
In all, staying up to date with your plumbing company’s financials will empower you to run your business more effectively and efficiently. In any small business, time is money. Consider purchasing plumbing software that can help you manage your company and organize your financials. Contact Smart Service today to request a demo of award-winning plumbing software. Talk to a representative about how Smart Service technology can help your business.