Latest / Cash Flow Conversations with Fexingo: Working Capital, Receivables, and Small Business Finance / How a Landscaper Used Progress Billing to Smooth Cash Flow
Transcript
- Lucas: So Luna, I've been digging into a landscaping company outside Denver that made one change to how it bills, and it completely changed its cash position. Luna: Oh, I'm curious. What was the change? Lucas: They switched from billing the full contract amount when the job was done to progress billing — invoicing in stages as work is completed. The owner said his days sales outstanding dropped from fifty-two days to eighteen days in one season. Luna: Fifty-two to eighteen — that's a huge jump. How did he get clients to agree to that? Lucas: That's the interesting part. He didn't just flip a switch. He phased it in over the season. For existing clients, he kept the old terms. For new contracts, he put in three milestones: thirty percent at contract signing, forty percent at the halfway point, and the final thirty percent on completion. Luna: So he tested it on new business first. Smart. Lucas: Right. And the surprising thing was, he didn't get much pushback. A couple of clients asked about it, but he framed it as a way to keep his crews fully staffed through the season, which honestly benefits them too. Luna: Yeah, that makes sense. If his cash flow is steadier, he's not scrambling to line up the next job to cover payroll. Lucas: Exactly. And the numbers bear it out. Before, he was carrying about a hundred and eighty thousand dollars in receivables at peak season. After a year of progress billing, that was down to around sixty-five thousand. That freed up cash let him buy a second excavator outright instead of financing it. Luna: That's real money. So what did he do with the extra cash? Lucas: He hired two more crews — which increased his capacity by about forty percent — and he built a small cash reserve so he didn't have to rely on a credit line during the slow months. He actually told me he hasn't drawn on his line of credit in two years. Luna: That's the dream for most small business owners. But I imagine there was a learning curve. How did he handle the administrative side? Lucas: He uses a simple spreadsheet to track milestones and invoice dates. He also set up automatic reminders for the day after a milestone is reached. He said the discipline of invoicing on time made a bigger difference than he expected. Luna: It's funny how the little things add up. So, for someone listening who wants to try this — where should they start? Lucas: I'd say start with a single project, maybe one that's big enough that progress billing makes obvious sense. Offer it as a choice: full payment at the end with a small discount, or three payments spread through the job at the standard price. You'd be surprised how many clients pick the standard price. Luna: Yeah, people like to keep their own cash longer, too. Lucas: And if you're worried about pushback, just remember that progress billing is the norm in commercial construction. Residential clients might be less used to it, but if you explain why it lets you keep a crew on their project without delays, most people get on board. Luna: And a couple of dollars a month is genuinely what keeps these conversations going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, it really does make a difference. Appreciate anyone who does. Luna: So backing to the landscaping company — what about the slow season? How did progress billing affect his winter months? Lucas: That's the other benefit. Because he's collecting throughout the season, he ends the year with a much healthier cash position. He even set aside a portion of each progress payment into a separate account for winter expenses. He said it's like paying himself a salary from the business. Luna: So he's smoothing out the seasonal rollercoaster that kills so many businesses. Lucas: Exactly. And it's not just landscaping — any service business with big projects can use this. Think roofers, painters, even web designers. The key is to tie the milestones to something objective, like a phase of work, not a calendar date. Luna: Why not a date? Lucas: Because if you're late because of weather or a supply delay, and you're billing on a date, clients can push back. But if you bill when the foundation is poured or the first draft is delivered, it's tied to value they can see. Luna: That's a good tip. So what's the one thing you'd want a listener to take away from this episode? Lucas: I think it's that you don't have to wait until the end of a job to get paid. If you can shift even a third of your billing to progress payments, you can change your cash flow profile without taking on debt. It took this landscaper one season to transform his business. Luna: And that's a pretty good return on a simple change. Lucas: Yeah, it is. And if you want to dig into the numbers for your own business, we'll put a link to a simple progress billing template on our show notes page.