Plumbing is an essential business. A report from RationalStat notes that the plumbing market was valued at $56.8 billion in 2023 and is projected to reach $82.2 billion by 2030. The need for residential and commercial construction is a significant driver of the market’s growth, with efficient plumbing systems being sought out for more projects. With the demand for plumbing services increasing, companies can leverage these opportunities to generate revenue and boost business success.
But it’s not enough just to gain more profit; managing and reporting finances is a must for monitoring financial performance and ensuring you have enough funds to stay running. Here’s how you can ease financial management and reporting for your plumbing business.
Establish an Account Hierarchy
Organization is crucial for the financial management of a plumbing business; without it, your company risks inaccurate numbers, failure to comply with standards, and difficulty reporting.
Establishing an account hierarchy for your business can help you arrange your data logically and consistently to understand your company’s financial health better. Softrax defines account hierarchy as the structure, organization, and categorization of accounts to ease financial reporting, analysis, and management.
A major part of an account hierarchy is the chart of accounts, which lists all the financial accounts used to record transactions. Under each account, you can categorize finances into assets, liabilities, equity, revenue, and expenses for a more detailed summary. Arranging accounts around specific clients or projects can give you an idea of the financial performance and status of each one, which can provide more clarity and organization. Knowing where your money is going, and which accounts have certain responsibilities can make managing and reporting your finances easier for smooth accounting.
Make Payments Easier
For the home service industry, collecting what is owed is essential to financial management. Insights from the US Chamber of Commerce highlight that doing so helps with record-keeping, managing cash flow, and compliance. As such, it’s critical to make payments easier for your clients—otherwise, you’d likely spend a lot more time chasing after them than getting work done.
One way to do this is to bring a portable swipe machine for credit card or mobile banking payments when you go to jobs, as this will ensure customers don’t fall back on the excuse of not having enough cash at present.
Another option is to introduce a membership plan or service agreement where clients can pay an annual or monthly fee which entitles them to regular maintenance or number of consultations per year. This gives you an increased volume of business and a more predictable stream of revenue because customers pay upfront for a package of services.
Finally, you can offer alternative financing options to customers that allow them to spread out their payments over time. From here, you can use software to keep track of payable accounts, automate invoices, and streamline follow-ups so you reduce the risk of unpaid accounts. For instance, you can utilize cash flow software like Tesorio to automate critical tasks and create valuable insights on payment collection for optimized cash flow.
Establish clear payment terms for customers to ensure that everyone is on the same page about fees, and ensure your invoices are detailed to avoid late or incomplete payments. This helps establish trust with both clients and vendors to keep your plumbing business financially healthy.
Outsource to a Pro
As a plumbing business, you’ve likely spent more of your time honing your skills in fixing pipes and installing fixtures rather than learning how to do bookkeeping. It might be better, then, to outsource back-office tasks like payroll and invoicing to professional service providers or even look into accounting automation.
Working with a professional can minimize mistakes that would otherwise cause confusion and affect your financial management and reporting for your plumbing business. You can also have your accountant analyze financial records and data to better understand your business’s performance and income. This makes compliance with accounting standards and taxes much more straightforward, preventing mistakes when reporting income or deductible expenses. A professional accountant can even look into reducing costs where doable, make recommendations on pricing, and forecast your cash flow to improve the bottom line.
To reiterate our 7 Business Skills to Win in Plumbing article, you deserve prosperity. The home service industry is essential and valuable in protecting human health, and few have the ability, aptitude, and expertise you do. By prioritizing financial management and reporting for your business, you can ensure your hard-earned dollars go where they need to go promptly.
Colleen Anderson is a freelance writer based in Florida. She writes primarily about technology and business and hopes to find a role covering one or both subjects for an online magazine or journal in the near future.