3 Common Money Problems & Solutions

1. Not Knowing Your Financial Situation
You can know your trade inside and out, but if you’re in the dark about your financial standing, your business could go down the tubes.

“Being busy with clients is easy; being profitable is more challenging,” says Ellen Rohr, president of Bare Bones Biz in Rogersville, Mo. “You must learn how to keep track of your money, but many plumbers are afraid to admit that they don’t know how.”

Rohr recommends determining your Known Financial Position (KFP) by keeping a regular balance sheet (assets and liabilities) and a profit-and-loss statement (revenue and expenses). “You should be able to run a balance and a profit and loss at any time, understand how to read these reports and trust that the information is true and current,” she says. “If you’re not familiar with the financial jargon, learn it quickly.”

Find a savvy business owner, one who is not a direct competitor, who would be willing to mentor you, she suggests. Rohr admits that she needed help when she started keeping the books for her husband’s plumbing business, so she contacted a plumbing contractor in another state. “I wrote him a letter and told him I didn’t know what I was doing, and he told me where my head was,” she says. Joining a larger national association is a great way to meet successful business people, she adds.

If staying on top of your financial situation is too burdensome, it may be time to hire someone to do it for you, whether it’s an accounting firm or someone in-house. “You want to be able to see where you are financially, but you’ll probably want to delegate the work because you get paid by the hour for what you do,” says Matthew Tuttle, president of Stamford, Conn.-based Tuttle Wealth Management LLC. “You need someone who’s well-versed in financial matters and making sure stuff is not falling through the cracks.”

2. Not Charging Enough
Your profit margin must be large enough to meet your needs. Looking at competitors’ prices to determine how much to charge your customers is the wrong way to go, Rohr says.

“Don’t look to the masses to figure out how much to charge because the sad and sorry truth is that a lot of plumbers don’t make much money,” she says.

In order to estimate what to charge, add up all your business costs, including the amount that you want to make as income, and divide that by the maximum number of hours you can work. “Essentially, you need to come up with a break-even, per-hour cost and then charge more than that for whatever profit you want to make,” Rohr says.

If your competitors charge less than you, market yourself as a plumber with higher quality standards. “Let the competitors take the bottom of the barrel work,” she says. “Be worth more and communicate that in your marketing and presentation to customers. There will be customer expectations that align with your higher level of work.”

3. Collecting Payments
Having enough cash flow for your business can become a problem if you’re not getting paid on time, Rohr says. Accept credit cards so customers can pay you as soon as a job is finished, or if the customer can’t pay the whole bill at the time of service, suggest a financing program offered through a bank.

Also, make sure you are billing at the time of service or soon afterward. “If it’s been over 60 days and the customer hasn’t paid, the probability of them paying at all goes down dramatically,” Rohr says. “A lot of plumbers don’t even get their bills out in that amount of time.” 

Making a call to the delinquent customer weekly to remind them of their outstanding balance and an in-person visit after a month, is appropriate, Rohr says.

Tuttle recommends keeping clear, thorough records and delegating someone else in the company to follow up with overdue payments. “Don’t think about it and say you’ll get to it because then it never gets done,” Tuttle says.

Note: This content is for informational purposes only. Lowe’s makes no warranties and bears no liability for use of this information. The information is not intended, and should not be construed, as legal, tax or investment advice, or a legal opinion. Always contact your legal, tax and/or financial advisors to help answer questions about your business’s specific situation or needs prior to taking any action based upon this information.