3 Things Every Smart Business Owner Should Know About Finances

In the water damage restoration industry, we never depend on business to stay steady. Since we work on an emergency basis, our work fluctuates with the needs of the community where we live and work.

These sudden changes and shifts in business can make running a company difficult. We know we can’t always depend on today’s business to predict tomorrow’s financial success. Smart business owners who manage their finances well are never taken off guard by sudden lulls or spikes in their business. Smart business owners have planned ahead, preparing their company finances for the challenges that are so typical to our industry.

Know Your Budget

It may seem like that most basic of advice, but not all business owners have a comprehensive and detailed understanding of their budget. Some business owners begin with the idea that as long as they aren’t spending, their finances will be healthy. Others are convinced that you have to spend money to make money, believing that what they spend now can be paid back by their profit in the future.

At More Floods, we think healthy money management falls somewhere between these two philosophies. Of course you must spend money to make money in water damage restoration, because you need supplies, employees and equipment on hand to respond to emergency jobs. At the same time, you shouldn’t just spend thoughtlessly, or you just might find yourself caught off guard by the lean months in your future.

This is where a budget comes in. The purpose of a budget isn’t to keep business owners from investing money into their work, it is to help them determine where their money will have the most impact. A budget should be detailed, breaking expected expenses into categories. For example, it isn’t enough to plan what you will spend on labor, you also should know what you will spend on their benefits, paid time off, time in training and uniforms.

Know Your Cash Flow

When it comes to tracking your expenses, cash flow is perhaps the most important thing to pay attention to on a regular basis. Cash flow is determined by know how much money is coming in, minus what is going out. This is pure profit for your company.

Tracking cash flow is important because smart business owners make projections about their future cash flow based on what they know about how their business is doing today and how it has done in the past. Projections should be done on a monthly basis. First, you should outline in detail what you plan to spend on everything from labor to supplies to vehicle repairs for the upcoming month. Next, predict your income based on the business you have on the books and what you know about how your business has performed in the past.

Before you are through with your monthly projections, you should make adjustments to your predictions for the rest of the year. How will your actual cash flow from the last month change what you expected for the upcoming quarters? Will you make more or less than you had predicted at the beginning of the year? How will this affect how you spend your money in the upcoming months?

Know How Business Fluctuates Over Time

Watching how business fluctuates over the course of the year is important for any business owner, but it is especially valuable in the restoration industry. Even though much of our industry runs on an unpredictable schedule, there are trends we can watch for that are often influenced by the changing seasons.

This is why we encourage water damage restoration business to watch their profits and expenses carefully over the course of the year. Looking at your finances through a wide lens allows you to see when you might be able to expect a peak, or dip, in your business. This allows you to prepare ahead by scaling your business in either direction. These projections can also help you prepare for lean seasons, so you’re not struggling to get by while you wait for business to pick up again.

The good news is that tracking business isn’t complicated, most quality finance management software include these features, allowing you to control the data you are most interested in reviewing and customize date ranges so you can look closely at a month or widen out to look at the entire year.

Putting it on Autopilot

If we have learned anything about running a water damage restoration business, it is that businesses that don’t value systems will struggle to maintain consistency in the workplace. This is especially true of finances, which must be set up on autopilot if you wish to consistently manage them well.

Beginning with invoicing, a system should exist to make sure you are being paid and paid on time. Of course, getting paid isn’t the only aspect of managing your money well. There are also supplies to be ordered, payroll to manage and a budget to update each month. Systems should make these tasks simple, so that you can spend the rest of your time focusing on the tasks that deserve most of your attention.

We suggest using a cloud-supported software for managing the company budget, tracking revenue and expenses. There are plenty of software options out there. Please contact More Floods for recommendations that best address the unique needs that come with running a water damage restoration business.

At More Floods, we have found the systems that work best for managing finances in small restoration businesses. Our members have access to the documents and software we rely on to manage our money well. To learn more about become a member, click here or call 1-866-667-3356.

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