Understanding and protecting your cash flow can be one of the most important things to the survival and prosperity of your commercial cleaning business. By making a few critical decisions up front about how you were going to operate your cleaning business, you will be prepared for success.
Most contract cleaning companies who have regular customers bill and receive payment monthly. Not only is it important to collect your payments on time but much thought should be given to you when you bill your customer. This one factor can be the most critical decision that can either limit the growth of your company or propel it to new heights.
Consider this, if you get a new contract for 2000 a month and you clean it five days a week that’s approximately 20 visits per month. Let’s say you bill your customer at the end of the month when you have completed a months worth of service. During that month you will have incurred 20 days of expenses for labor, materials and supplies, and overhead.
Since labor is the biggest part of running a cleaning operation, in order to operate the first month you will have to pay for your expenses out of pocket. Also just because you send the invoice out at the end of the month does not mean you receive the money for possibly 2 to 3 weeks or more, meaning you have to float even more capital until you receive payment.
When taking on a new customer it is up to you to dictate the terms and conditions of your service. In order for providing top quality reliable cleaning service is reasonable to ask that the customer pay a month in advance. By insisting and sticking to this one small detail the scenario changes completely.
Now let’s say you take that $2000 per month contract you immediately have your expenses for labor materials overhead and profit in hand. This means you can go out and get new accounts without the cash flow issues that you would have if you waited to bill the customer after 30 days.
If there is just one thing above all else that you want to make sure you put in place in your cleaning business, I would suggest a cash in advance policy.