As tax season comes to an end—what’s next? It’s time for a little small business spring cleaning. Staying organized and on track is within reach even as seasonal peaks near. You can do this and reduce overhead burden. Follow this guide to ensure operational efficiency and a fresh start for small business owners.
The Post-Tax Pivot: From Recording the Past to Planning the Future
Tax stress is real. Documenting, auditing, and reviewing take considerable time. Working long hours on taxes usually translates to bypassing other tasks. As you say goodbye to those obligations, you can now set your sights on planning and getting caught up. Take all you’ve learned to influence your future.
Motivated go-getters like you can easily make the post-tax pivot. You’re ready to prep for the busy season and ensure tax stress never recurs. This fresh start allows you to put the future in your sights.
Recording your past paves the path to planning for the future. You cannot look forward without looking back. However, you’re no longer reviewing the past through the lens of taxes. Now, you need to capture data that can be actionable as you head into the busy season.
Understanding past profit margin vs. markup, cash flow, and days sales outstanding (DSO) is essential for forecasting revenue. DSO is a financial metric that measures the average number of days a company takes to get paid after a sale. It also tells you how and when people pay you, which impacts cash flow.
You’ll likely need stronger cash flow in the busy season, and you’ve just spent a lot of time going over the previous year’s revenue and expenses. How can you use this data?
There are so many ways to use historical information to guide your future. One of the key things is to audit your estimates for trends.
Auditing Your Estimates: What Services Are Actually Closing?
The first step in small business spring cleaning is auditing your estimates. Take the time to review all those from the year prior to determine which services are delivering business growth. Compare estimates versus invoices. Analyze why estimates didn’t translate to invoices to uncover insights.
Estimate and invoice auditing can deliver valuable information. From this data, you’ll be able to discern the services that have the most relevance to your customers. What makes that service unique and a driver of revenue?
It could be the service itself that you do exceptionally well and may offer things competitors do not. Another reason could be that you have the most favorable pricing. Cost is a key decision-making criterion, as 69% of consumers said it was a top driver for repeat business.
Add context to this analysis in terms of current and future demand. Will the service continue to be a moneymaker? Are there changes in demand? Is there new competition that didn’t exist before?
Analyzing Estimates That Don’t Convert
Next, you want to define why estimates don’t convert to business won. If you sent 100 estimates in the last year but you only booked 25 jobs, there’s a reason for this. Your pricing could be too high. To find out, gather intel on what similar businesses are charging. You don’t have to be the lowest price, but you want to be in the ballpark of others.
The service could also have issues. You may not be offering the same benefit as others. Compare yours to others to see if you have any gaps. If you do, determine if you have the ability to adjust your offering.
Another cause for low conversion rates is a lack of follow-up. After sending estimates, did you contact the potential customer? Did you reach out by email, phone, or both? Did you track this outreach and document any reasons why they passed on the estimate?
Assessing Customer Communication
Regularly communicating can help you build customer relationships. It’s a time to answer questions and strengthen trust. If you’re just sending an estimate with no follow-up, you may be missing out on new or recurring customers.
However, sometimes things fall through the cracks, which is why it’s critical to have technology to support your estimating process. Doing all this work manually is a strain. A platform designed for small businesses can automate follow-up and send notifications to you when there’s no response. You can then be more proactive in communicating with customers. This type of engagement can pay off in the end.
Improving Profit Margins
Improve profit margins with an estimating app designed for you.
An estimating and invoicing app also makes these business finance audits simple and easy. You won’t have to spend hours you don’t have on administrative work. Instead, you can leverage the features in such a solution to produce the reports and information you need quickly and accurately.
With a turnkey system for estimating, invoicing, and payments, you could improve profit margins at a more efficient scale. When considering this, be sure to consider markup vs. margin or use a profit markup calculator.
You can reduce your operational expenses by adopting one. It can also support budgeting and forecasting, so you’ll have data to drive pricing changes.
Purging the Paperwork: Digitizing Your Spring Supply Run
The next spring business tip is transitioning from physical paperwork to a digital process for managing spring supply purchases. You’ll be better organized by going digital, and you’ll never have to search and hunt for receipts when you can scan them instantly and store them in your app for business finances.
How often do you face lost receipts? An expense review from the year before will be slow and challenging when you can’t locate all of these. Not having digital access to these creates more work for you.
So, it’s time for a new rule! You need a solution with a mobile app to scan in receipts at the time you receive them. Having all this information in one place also delivers more insight into how much you’re spending on gear and materials. You can see trends in costs and the changes, which can be useful in budgeting.
Here’s how a digital business expense tracker works:
- Use a mobile device camera to scan the receipt, automatically capturing all the details.
- Create a new expense entry from the scanned receipt with one click.
With all this data in one place, you can generate expense reports for any date range. You can export these in several formats.
You can officially say goodbye to boxes of paper receipts, which also makes tax time more stressful. Everything you need is in your app.
Cleaning Up Your Client List for Better Communication
Communication with clients is critical to your financial health check. With technology tools, you can be more organized, efficient, and productive. Now is an excellent time to clean up your customer database. Doing so makes invoicing in the field possible, allowing clients to pay immediately for services.
Follow these small business spring cleaning tips to ensure accuracy in client information and timely communications.
- Audit your data. Start by reviewing current information. Then, identify anything that is incomplete or inaccurate. You can also delete anything outdated. For example, you may have clients who have moved away from your area and are no longer viable.
- Remove duplicates. Use automated tools within your customer database to find duplicates. You can then delete or merge them.
- Verify and update details. Look back at invoices or other communications with customers to fill in some of the missing information. You can also send out surveys to your customer database, asking them to send you an update.
- Purge old data. Review old leads without activity for the last few years and estimates to determine if you should delete. Cleaning up databases reduces clutter and your data in storage.
- Standardize formatting. Ensure you’re using the same formatting for fields like name, email, phone, and address. Standardized data is easier to search.
There are numerous benefits to cleaning up your client list this spring, as described. Accurate data makes invoicing at the time of job completion streamlined. Technicians will be able to find their account and create an invoice in the app.
Invoice generation software enables customization of templates. Add your logo and branding for a professional look. Other options include taxes, itemization, discounts, terms, language, and more.
Once created, you can send the invoice via email and receive payment via credit or debit cards. All transactions are available in the platform, which will greatly help you next tax season.
Setting Your “Busy Season” Boundaries with Clear Terms
As demand for your services reaches its seasonal peak, you will have more leverage in your terms. You want to protect cash flow and primary revenue, so it might make sense to consider moving from net 30 to due on receipt. You can revise terms at any time in your invoicing app.
Problems with slow payments are universal to small businesses. In fact, 80% of these companies said they struggle with late or slow payments from customers.
If you choose to update your payment terms, you’ll need to make this clear to customers, both new and existing. Being busier also means you’ll have more expenses, so you need to ensure there’s a steady income flowing.
There are pros and cons to every decision. You may also want to develop categories of invoices for which you will require immediate payment. Here are some considerations.
Pros vs. Cons of Changing Terms
| Consideration | Details | Pro or Con |
| Does the peak season require more cash flow and higher expenses? | Volatile cash flow is often a concern for small businesses. Around 70% of them only have four months of cash reserves. | Pro: Shortening terms can help with this challenge. |
| Should you require immediate payment for certain jobs? | Small invoices under a certain dollar amount could be a category to ask for payment on the day of, at any time. | Pro: These invoices are likely to have the least friction. |
| Could changing payment terms for long-time customers create negative customer experiences? | If they are accustomed to paying within 30 days, the switch could cause challenges. | Con: It could disrupt what your regular customers expect. |
| Can you incentivize customers to make same-day payments? | You could offer a discount for early payers. | Pro: You get paid on time, and customers get rewarded. |
| Should you add late fees? | If you’ve been clear about terms but the customer doesn’t remit, you may find it reasonable to include a late fee. | Con: It could discourage new customers. |
| Is there room for negotiation? | This point aligns with larger jobs with higher price tags. | Pro: There may be circumstances where this is necessary to secure the work. |
Many customers likely won’t have a problem paying immediately once you’ve rendered services. Since you can create an invoice in minutes, there’s no lag time. If you have a small business invoicing solution with payment processing, technicians can take payments in the field.
Payment processing fees may apply, but you have the option to pass these on to consumers in certain situations.
Be sure you’re able to offer flexibility in payment options beyond credit or debit cards. Digital payments like Apple Pay, Google Pay, and Stripe Link have become very popular. Make sure your platform offers these.
Invoices will have links or QR codes for the customer to use to remit. It’s a secure and seamless process. With these capabilities, you’ll no longer be dealing with manual processes and chasing past-due bills. You’ll be more likely to be paid on time with this workflow.
Additionally, you have complete visibility into tracking cash flow. In one area, you can see invoices that are paid, unpaid, or overdue.
Small Business Spring Cleaning Actions
Here’s a recap of the spring business tips discussed:
- Post-tax season is a clean slate for the busy season ahead. Use this time to audit, review, analyze, and take action.
- Estimates to invoices is a key metric to understand business growth, churn, and the reasons potential customers don’t convert. Take what you learn and apply it to your operations, sales, and marketing strategies.
- Finding ways to boost efficiency and productivity is much easier when you digitize expense tracking. Getting rid of manual and paper processes saves time, ensures you don’t lose receipts, and allows you to always be aware of spending.
- Communicating with customers is vital to keeping them long-term. However, you’ll encounter issues if your data is inaccurate or incomplete. Clean databases make invoicing and other activities much faster and easier.
Your Spring Financial Health Check
The time between tax and busy season provides a great window to audit your performance and get organized. Part of that is using the right technology. You can simplify and streamline all your financial activities with a platform designed for small businesses.
Explore the Invoice Simple solution and all its capabilities.
FAQs
What is the most important financial metric to check before my busy season starts?
It’s the most crucial metric for several reasons. First, you have to pay for supplies, gear, and staff before your customers pay you. Monitoring your cash flow for operations informs you of when you could run out of it.
Second, it’s useful for managing costs for materials you need, so you are well stocked without spending beyond your profit.
Third, it can signal that you need to free up capital via a line of credit or from savings.
While operating cash flow should be at the top of your list, you’ll want to assess these metrics, too:
– Gross profit margin: Informs you of the profitability of your jobs after the direct costs.
– Accounts receivable days: Measures how fast your customers pay, which you can optimize for quicker payment. If your DSO is over 30 days, this may indicate that you should rethink the terms to require payment immediately after the job is complete.
How can I use my previous invoice data to predict my spring revenue?
Some quick steps to do this assessment:
– Clean and organize your data: If you’re using an estimating and invoicing platform, this will be easy to locate and download. If you’re using spreadsheets, it will require more time and manual work.
– Define your seasonality: Peak season begins for you in the spring, so focus on the months over the past few years in that range.
– Determine your growth factor: Year-over-year percentage increases are necessary to forecast the future.
– Add your pipeline data: Look at what you’ve already booked for jobs and the estimates you’ve created. You may only want to consider those with the highest probability of conversion.
– Make adjustments for other factors: This is where you incorporate things like demand changes, increased costs, new competition, and pricing updates.
