Are you constantly struggling with cleaning company cash flow?
Cleaning company cash flow can mean the difference between success and closing up shop.

Today Mike coaches Michael Guerra of Pacific Coast Cleaning Services (http://www.pacificcoastcleaning.com). Mike coaches Michael on how to deal with cleaning company cash flow in his cleaning company.

SAD BUT TRUE: 90% of businesses go out of business, not because of profits, but because of lack of cash.
You read right friends, businesses fail far more often due to lack of CASH than lack of profits. You can be extremely profitable and STILL go out of business.

Michael starts by asking Mike about getting a loan to help with cleaning company cash flow. Mike explains why in the cleaning business, the need for a loan is a signal for a much bigger problem.

If your cleaning company is having cash flow problems it is typically because your pricing model is broken or you are not billing correctly.

Often owners of cleaning companies can’t understand WHY they work so hard and can never seem to make any money. The good news is, oftentimes the solution can be as simple as fixing your pricing model and charging your customers properly.

BONUS LOVIN: Check out more than 20 FREE Videos on how to price properly HERE!!
If your problem isn’t pricing and you are still having cash flow issues with your cleaning company, you can bet your problem is billing. Mike dives deep on how to fix that problem in this episode.

One of the best things about the cleaning business is the recurring services and billing. Unlike most businesses that have to sell sell sell to make their bills every month, owners of cleaning companies have all of their accounts already sold. When you set up your billing properly, they have all of their cash at the beginning of the month!

Sound interesting? Read on my friend…

Many residential cleaning companies Mike coaches will bill after they clean either at the end of the month or the next day. Billing the next day creates a LOT of accounting work and headache and billing everyone at the end of the month creates cashflow issues…

It gets worse with commercial accounts. Owners of commercial cleaning companies typically bill their customers at the end of the month. This creates cash flow problems. Often, they don’t get paid for 15-30 days after that. Not only does this make your cash flow problems even worse, you (typically a smaller company) become the bank for your customers (typically larger companies with better cash flow).

So what’s the solution?
Bill at the beginning for the month.

To some of you it may sound too simple. To others are probably screaming at the computer right now “But all my customers will leave if I try to bill them at the beginning of the month and I will have to close my doors!”

The reality is if your cleaning company cash flow is becoming a serious problem, you can’t afford not to.

Does this sound familiar…
It’s the beginning of the next month. A customer’s payment for last month’s service is late. You call and they say they are going to pay. 2 weeks later you still haven’t gotten a check. You call again and now they’re 60 days late. They offer you a small payment trying to “catch up” what they owe you. You’ve been cleaning their home/office for the last month and now they’re almost 2 months behind in payments. You’ve been paying your employees from revenue from other accounts. Now you’re stuck with the choice of either continuing to clean in hopes that they eventually pay you in full or stopping cleaning and likely never seeing any of the money they owe you for services you have already performed and paid your employees for.

If that sounds all too familiar, change is NOT optional. Mike talks about how you probably won’t need to just change your billing process, but your mindset as well.

Part of what they are paying you for to have materials, staff, training and infrastructure ready to perform that service. They want a legitimate business that they can count on for excellent service, and that takes cash flow.

They must pay you in advance for that because if they don’t pay you, you still have to have that infrastructure ready.

With this perspective on why they pay you and the value you that you bring, you can be confident in changing your billing practice to protect your cleaning companies cashflow.

MORE BONUS LOVIN: I did a super fantastic extended industry expert edition of the show on cleaning company cash flow HERE. It’s free and it’s awesome!

Ideally you will just have the customer’s credit card on file and charge it the first of the month for the upcoming month (you would run all of your customers credit cards for January on January 1st). This will virtually eliminate time wasted on billing and collections and improve the cash flow of your cleaning company drastically!

For customers who don’t pay by credit or debit card, send an invoice on January 25th for February services. The money is due by the 1st and by the 3rd, if not paid, you stop cleaning. Just as important, you do not start back up until they pay in full!

If you are worried about losing that account, DON’T! You aren’t losing a good customer, you are losing a liability who will likely cost you money in the end and opening up your time and resources to a better account.

Now that we know billing at the beginning of the month before services are rendered is the best way to fix your cleaning company cash flow problems, how do you make that transition?

The ineffective way is to go to your customer in a guilty, shameful tone like you are trying to pull a fast one on them.

“Hi Mr Customer, I know we’ve always done this and I’m really sorry but we can’t do that anymore and now you’re going to have to pay before…”

If you have the mindset that you are doing something shady to them, they are going to pick up on that and reject it outright.

If you approach it understanding the reality that you are going to be able to give them superior service and reliability and that this new way of billing is beneficial to everyone you are going to have a much better response.

BONUS TIP: Mindset is 90% of your success.
Remember the bill for your services is nearly always a VERY small part of their budget so having a credit card on file with you auto charging it every month will save them the time of having to receive the bill, write a check, find an envelope and stamp, worry about it getting there, etc.

FAIR WARNING: The customers who complain about the change are often not financially solid and at a high risk for not paying their bills…

There are a couple of ways to transition your business to that billing model:

The less obtrusive way is to start with all new accounts going forward. It’s the least scary way to do it, but you’re left with a mess of some accounts are at the end or middle of the month and the rest are at the beginning.

The second way is to start with your least profitable accounts and your worst customers. The ones that don’t pay on time or are a pain in the neck. Change with them first since you won’t have any (or as much) emotional attachment to them giving pushback on the change.

The hardest, but in Mike’s opinion, the best way is to rip the bandaid and change ALL of your accounts over to the new billing system.

If you have less than 30 customers, go out and have that conversation in person. If you have between 30 and 60 have the conversation via the phone, if you have over 100 you might want to do a letter or email. Don’t tell them it’s starting “today” that isn’t professional, but start at the beginning of the next month so they have 30 to 60 days notice.

Before the fun ends, Michael shares some of this experience in the Lighting Round.
Don’t spend the money you don’t have. Sound advice for all aspects of life and business.
His biggest mistake was asking a customer for a check 2 weeks early to repair a broken truck. Ouch!
Organize your time well!
Did we miss anything? Have more questions? Leave your question or comment below as Mike answers every one of them!!