Cash is king in this business, and that's why Karen Dowd-Carpenter is fanatical about collections in her Alexandria, Va., company, Potomac Builders.
"We know that maintaining a strong cash flow has to be a focus in order to be able to run our company properly," she says. "So our billing system has to deliver the cash we need when we need it."
To know exactly how much that is, the company's office manager uses an Excel spreadsheet to compile information and predict the cash needs for several months at a time.
"We compile all known or expected expenses including vendor bills, payroll, and employee benefits," Dowd-Carpenter says. "Most of these expenses hit at the beginning of each month, because our vendors demand payment by the 10th if we're to receive the 2% discount — and we always want that discount! It adds up significantly." Completing these expense projections requires less than one hour each month.
To track collections, the company uses a simple white board, "The Money Board," which lists each project in progress, as well as those on the books but not yet started. Each job listing includes the dates that invoices will be sent as well as the amounts to be billed.
"This gives us a visual prompt to make sure all bills have been reviewed and to prepare invoices that are then e-mailed to our clients," Dowd-Carpenter says. "Plus, we review it at every weekly production meeting to make sure the project managers are on top of the details for the project before we bill."
Potomac Builders requires a 5% deposit at contract signing, another 10% at the start of the job, and then splits up the remainder according to specific benchmarks, such as start of insulation or setting of windows. "We feel that our customers prefer to tie their check-writing to something tangible," Dowd-Carpenter says. She also includes a nice note with the invoice to the client with a reminder that payment is due at their next week's jobsite meeting, when the check is picked up and returned to the office.
"It's not terribly sophisticated, but this system helps us meet our cash needs in a predictable fashion, which means we don't have to panic because we need cash," she says. "Using a system like this reduces stress and keeps our bank accounts where we need them." — Victoria Downing is president of Remodelers Advantage, Fulton, Md. (301) 490-5620, firstname.lastname@example.org.