Get Your Money Now

Successful plumbers aren’t in the business of lending money and depending on accounts receivable.
Get Your Money Now
Steve Huff

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Let me tell you something about yourself. Some of you have been in the plumbing business for what seems forever and still don’t have two nickels to rub together. Some of you owe thousands of dollars in back taxes. The reason is, some of you also have more money owed to you (accounts receivable) than your annual gross sales. This could also explain the tax thing.

Still, I doubt many of you would go up to a stranger and hand them several thousand dollars and say, “Here take this; you can pay me back later.” But, when you tell someone you will bill them for your work, isn’t that exactly what you’re doing?

Blame yourself

When you don’t collect your money (and it is your money) at the time of service, you are essentially loaning that person money at no interest, payable whenever. So, those of you with a high accounts receivable have no one to blame but yourself.

Once an account goes over 30 days, the chances of collecting go down by half. After 60 days it goes down even more, and after 90 days the odds are about the same as Google taking you to the exact website you’re looking for on the first try. This leaves you looking in the couch for change while someone else is living the good life on your money.

I visited a company years ago and the owner thought having $35,000 in accounts receivable was a good thing. In his world he saw it as money in the bank. I could not get him to understand that it was money in someone else’s bank, not his. He also had title loans on two of his trucks. Go figure.

Despite having our own battles over the years collecting money owed to us, at the end of last year on sales of $1.7 million, our accounts receivable was a nice round number: zero.

Don’t be a lender

How do you accomplish what to most of you seems like an impossible task? It’s simple. Take banking and loan off your business card. Then don’t do work for people who can’t pay you when you get done.

When someone calls us to schedule an appointment, we ask how they’ll be paying: check, cash or credit card? We call it our 100 percent down and no monthly payment plan. If they don’t agree to those terms, we don’t go.

If you are one of the people I described earlier, you might someday collect some — but not likely all — the money owed to you. You’ll collect just enough to barely keep the doors open and think everything will be OK. All the while you are still loaning money to more people.

Eventually, you will tire of begging people for what’s rightfully yours and close the doors for good. When that happens, all that money goes away, because who owes money to a plumbing business that no longer exists?

If want to leave anything for your kids to fight over after you are gone, you need to collect the money owed to you as you go. Otherwise you will just die old, tired and broke.



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