Tracking cash flow in a service company: the cash position, the weekly figures and a fixed routine

Why profit and money in the account drift apart

The profit and loss account shows what you have earned; the bank account shows what has come in and gone out. In a company with technicians, there are often weeks between the two:

• Work done, not yet invoiced. The technician’s wage and the parts have been paid, but the invoice is waiting for a work order or for someone who has time.
• Invoiced, not yet paid. The turnover is in the accounts. The money only arrives after the payment term, and sometimes later.
• Stock in the vans and the warehouse. Parts you have paid the wholesaler for sit on a shelf until a technician uses them.
• Large installations. You pay your supplier for the heat pump or the water softener, often before the customer pays you.
• Contracts invoiced per year. The money comes in all at once; the work is spread over the year. The timing of the annual invoice decides whether the money arrives before or after the work.

Your account also holds VAT that you collect from customers and pass on later. That money is there, but you cannot spend it.

Cash position: what does it mean?

• Cash position: the money you have available today, the balance of your current accounts and your cash in hand. A snapshot at one moment.
• Net cash position: that cash position minus what you owe the bank in the short term, such as an overdraft (kaskrediet / crédit de caisse) that you are using. Ask your accountant which accounts they include.
• Cash flow: what comes in and goes out over a period. A positive cash flow over a month means that more came in than went out.

So tracking cash flow means knowing where you stand today, and seeing what will come in and go out in the coming weeks.

The figures you check every week and every month

For the age, a simple breakdown is enough: not yet due, up to 30 days past the due date, 31 to 60 days, more than 60 days. The older the invoice, the sooner you call. Which reminder to send when is explained in sending a payment reminder, and the operational figures in KPIs for a technical service department.

A fixed routine for every week

Choose a fixed moment, for example Monday morning, and one person to do it.

1. Note the cash position, every week on the same day.
2. Invoice what is finished. If a work order or a signature is missing, ask the technician for it today.
3. Go through the overdue invoices, the oldest and the largest first. Note for each customer what you will do and when.
4. Check what you have to pay in the coming weeks: suppliers, wages, rent, leasing, VAT.
5. Update the cash forecast for the next four to eight weeks.
6. Decide in time. Should a purchase wait, will you ask for a deposit on the next project, or will you talk to your bank before things get tight?

A cash forecast fits in a spreadsheet, with one line per week:

Under “expected in”, count only what is realistic. A customer who always pays two weeks late goes in two weeks later.

What you can steer

• Invoice soon after the work. How to do that without retyping is explained in from work order to invoice.
• Ask for a deposit on large installations, if your terms allow it and the customer knows in advance. Put the amount and the timing in the quote already: see writing a quote. If a consumer pays a deposit, you must draw up an order form, according to the FPS Economy (FPS Economy, 8 October 2024, in Dutch). Have your terms checked by your accountant or legal adviser.
• Send reminders at fixed moments, with a phone call at the second reminder.
• Choose deliberately when you invoice contracts. An annual invoice at the start of the contract year brings the money in before the work. Whatever you agree belongs in the contract.
• Keep the stock in line with what the work needs. See van stock for technicians and warehouse stock management.
• Pay suppliers on the due date. Paying earlier only pays off with a discount; paying later costs trust.

An example: Monday morning at a heating company

A fictitious heating company with six technicians installs boilers and heat pumps and maintains units under contract. The amounts are an example. On Monday morning, the managing director notes:

This week there is enough. But next week the wholesaler’s invoice for two heat pumps falls due, and the wages follow shortly after. The managing director decides:

• The fourteen interventions are invoiced this week. Three are missing the signature: the planner asks for it.
• The office calls the two property managers. One is waiting for the co-owners’ approval; the other asks for a copy with the name of the building.
• For the next heat pump, the quote includes a deposit, with an order form.
• From now on, the annual invoices for the maintenance contracts go out in January.

In his cash forecast, he sees that the third week will be tight. He is already discussing with his accountant how to bridge that week.

How it works in Digitalnatie Service Suite

The financial overview brings the result, the cash position and what needs attention together on one page. The figures come from your accounts: only posted entries count.

• Cash and working capital: cash in, cash out and net cash flow over the chosen period (year, month or a custom period), and receivables and payables as balances on the end date, including VAT. A month-by-month view shows the cash flow per month, optionally compared with the previous year.
• Needs attention, as of today’s date: the overdue invoices, the completed interventions still to be invoiced with their value excluding VAT, and the maintenance contracts that end within 60 days. One click opens the list.
• Expected contract revenue: the active maintenance contracts times the annual price, converted to a monthly figure.
• Invoices: on the invoices screen, the cards at the top show the outstanding amounts receivable and overdue. The side panel of an invoice says how long it has been overdue, and recording a payment notes what has come in. The administrator sets up the reminders before and after the due date in the automations.
• To invoice, and the annual invoice: creating an invoice from a completed intervention makes a draft invoice with the hours and parts. On an active maintenance contract, creating the annual invoice makes the draft invoice for the calendar year, at the annual price that has been set.

Good to know:

• A draft invoice does not count anywhere in the financial overview.
• Your ledger accounts must be linked in the account mapping. A category that is not linked counts as 0, and that is not a real zero. An automatic mapping proposes links based on the Belgian minimum standard chart of accounts (PCMN).
• By default, the administrator and the Finance Manager and Directie roles see the financial overview. Anyone without the permission does not see the menu item.
• The margin on parts is not available: the cost price of the parts used is not tracked per intervention.
• You keep the cash forecast for the coming weeks yourself, for example in the spreadsheet above.

More about invoicing in Service Suite and about tracking maintenance contracts.

Frequently asked questions

What is the difference between profit and cash flow?

Profit is the difference between turnover and costs in your accounts. Cash flow is what actually comes into and goes out of your account. In a service company there is time between the two: work not yet invoiced, invoices not yet paid, and parts you have already paid for.

What does cash position mean?

The cash position is the money your company has available at a given moment: the balance of the current accounts and the cash in hand. The net cash position subtracts the short-term bank debts from that, such as an overdraft you are using.

How often should you track cash flow?

Every week, at a fixed moment: the cash position, the overdue invoices, the work not yet invoiced and what you have to pay in the coming weeks. Every month, add the net cash flow, the stock and the large expenses.

How do you improve the cash flow of a service company?

Invoice soon after the work, send reminders at fixed moments and ask for a deposit on large installations if your terms allow it. Choose deliberately when you invoice maintenance contracts, and keep the stock in line with what the work needs.

Does Service Suite show the cash position?

The financial overview shows cash in, cash out and net cash flow over the chosen period, and the receivable and payable balances on the end date. Only posted entries count, and your accounts must be linked. You keep the cash forecast for the coming weeks yourself.