7 Tips To Streamline The Cash Flow Of Your Real Estate Appraisal Business
Running a real estate appraisal business without proper cash flow management is quite a challenging task. To avoid the risks associated with the process and to stay in total control, you need careful cash flow management.
In a typical scenario, business cashflow management involves-:
- Monitoring your income and expenses
- Optimizing the processes to make the most of your resources
- Analyzing data to assess how you’re doing in different areas of business
If you’ve been wondering about how to improve cash flow for your appraisal business, the following steps will allow you to effectively manage your financial issues and set a strategy to improve the overall health of your business’ cash flow.
Ways To Improve The Cash Flow Of Your Appraisal Firm
One of the most crucial aspects of building a successful property appraisals business is striking a balance between the optimal flow of money in and out of it.
If you’re looking for some expert tips to get your cash flow under control, here are seven smart ways that you can use:
1. Assess The Current Situation & Forecast Your Cash Flow
A robust understanding of data is the first step towards streamlining the cash flow of your business. Begin the process by collecting and collating all your cash inflows and outflows, followed by building a cashflow forecast.
Make a detailed list of revenue and expense sources along with the probable increases or decreases to each line item.
Once done, make sure to manage each item individually to find various opportunities to either grow revenue or reduce expenses.
2. Get Paid Faster Post Billing
In the property appraisals business, periods of growth put substantial strains on cash. This is mainly because your bill payments increase while your cash receipts don’t catch up, and your business has lots of cash tied up in accounts receivable.
Some of the ways to manage this situation and increase your cash flow include –
- Increasing the number of cash on delivery accounts (CODs) or pre-pays, especially with one-time clients and mortgage brokers, as that will help you increase your available cash substantially.
- Don’t accept assignments from slow-payers or make sure to put them on COD mode.
- Try to complete and bill your appraisals as soon as possible as every single day delayed translates to one lesser day of having the cash.
3. Disburse Your Money Slowly
Another excellent way to increase your cash flow is to make sure that you disburse your money slowly. Some of the ways that you can employ to ensure this are –
- Do not pay invoices before they are due.
- Always pay your appraisers after you’ve been paid. Since the labour costs are very high for a real estate appraisal company, delaying payments lets you use your cash for a longer period.
- Make use of business credit cards for travel and miscellaneous expenses as you don’t have to pay the bill until about 45 days post expenditure.
- If cash is tight, pay off some of your bills in instalments. Several vendors in the real estate appraisal business offer quarterly or monthly payment plans.
- Consolidate all your invoices from the same vendor into a single payment plan.
4. Streamline Your Business Processes
One of the other important aspects of managing cashflow is making sure that your business processes are running as efficiently as possible. Some of the tips to ensure smooth business processes are-
- Thoroughly analyze all of your existing structures, processes and find out ways to speed them up.
- Implement accounting software to send your invoices faster.
- Use time efficiently to spend less on wages and avoid excessive overtime pay.
- Think of different strategies on how to increase home value for appraisal and how to fix your credit.
5. Offer Mortgage
As a real estate appraisal firm, if you’re trying to sell a property, one way to get maximum value is to offer vendor financing. Rather than taking all your profits as cash, leave some in the property and mortgage it to a buyer. The buyer will then send you monthly payments similar to a regular bank mortgage, and this will provide you with a steady monthly cash flow into your bank account.
6. Reduce Operating Costs
Make it a practice to review your expenses, and identify the specific areas where you can reduce your costs.
Start by asking yourself these two questions-
- Are these expenses necessary for the business?
- In case the expense is necessary, what are the cheaper alternatives you can look at?
This is an important exercise to ensure that you do not spend money on unnecessary expenses for your business, and focus on areas that bring positive cash flow to it.
7. Take a Small Business Loan
Another way to improve cash flow is to take a short-term loan or line of credit. In this option, a lender grants you a fixed borrowing amount that you draw whenever you need cash and pay back the lender in regular instalments over a short period.
Some might argue against taking a loan, but there are several reasons to take out a cashflow loan, including-
- Purchasing inventory
- Expanding your business
- Covering off seasonal slumps
- Purchasing new equipment
- Managing unexpected expenses
Cashflow analysis is one of the most crucial metrics that help businesses forecast future growth. Keeping track of your cashflow allows you to understand the financial position and health of your business, and provide major insights into your business’ financial state. Whether you decide to streamline your billing, focus on increasing your sales, decreasing your expenses or doing all of these, these simple ideas can help you gain a better understanding of your business finances, improve your cash flow, and grow your appraisal business steadily