Are Cashflow Problems Secretly Killing Your Letting Agency?

by | May 6, 2016 | Strategise Knowing Your Numbers

As ridiculous as it sounds, business can be so confusing sometimes. You have your bank accounts,  you may have your SAGE or similar accountant business management accounts, but these seem to bear no reality towards your cashflow accounts, which seem to take on a life of their own!

So how does a new business keep on top of the money in and the money out…?

It’s tricky, but in my businesses it’s about accountability and habit.  We have a cashflow meeting every month, called that because in the early days it was about managing the cash flow into the business, but now it’s more about projections, targets and results, but whatever you call it, you need to put time aside to do it.

In the early days, it might just be you working through your figures, cash flow, business accounts and the bank statements and making sure you can see where you are going, where you have been and what you need to do, but as your team grows, you may wish to allocate this to someone else, as it can be very time consuming.

And it is by doing this, throughout my agencies, that some really startling things have come about over the years, so I thought I would share a couple of them with you here:

Case 1 – Fee discounting without consent

Once I had a negotiator working for me that was on the surface doing great, deals were appearing on the board at a rate, I have never seen before, she was beating the other negotiator in the office hands down, and was lapping up the praise, but over the next couple of months, we noticed income dropping, we were achieving the deals, but just not getting in the amount of money we would expect for such a number of lets…

On analysis of the figures, it turned out that they were discounting everything, letting clients off fees left right and centre, I was shocked, and we had lost over £10,000 in just 3 months… I pulled her to one side and explained, “This agency works on a 30% profit margin, so when you discount the fees by 30%, what am I left with, why am I paying you, this is not good business!” so although the other negotiator was doing half of the lets of this lady, she was actually making me loads more on income and profit.

Case 2 – not getting payment in

Another situation I had once was a chap who was letting properties, but just not getting the money in, so they were appearing on the management accounts as deals and income, but the cash was not showing up, this was even worse, because we were actually paying VAT on income we had just not received and never would have, if we had not picked it up.

It’s really important to know your business income expectation, your business accounts and cashflow figures, as they will be different, and keep your team and staff members on track, remember to them it’s just a job, they don’t understand the importance of getting the money in, and making profit in the main, they just want to get paid, so perhaps find a way of making them accountable.

Something we do, is we get them to complete commission sheets, and then the manager has to check all the elements of the deal, were they charged the right amount, has the money come in, is all the paperwork in order, and it is only when EVERYTHING is in place, that the commission is paid to that team member, which means these scenarios, rarely happen now.

So in brief, know you figures for both cashflow and management accounts, build systems to manage your staff and their performance and protect your income and have a routine with your money, its important, it the lifeblood to your business and without it, you won’t get very far.