Traffic Lights

Let’s face it, business is a struggle at the minute for any plumbing and heating firm. You might have full order books but staff could be jumping ship for pay rises in other businesses. You might have to pay recruitment fees to recruit new engineers and then there’s the cost of training them and getting them installed in your business. Fuel prices are increasing, Bounce Back Loan repayments are in full swing all coupled with customers taking longer to pay because everyone else is feeling the pinch.

All of these can have a negative impact on your cash flow. So, what can you do to ensure your business is as lean as possible?

Have you heard of the traffic light system? 

Let me explain now…

Review your bank statements regularly. Quarterly is ideal. Carefully check every bank payment transaction on your bank statement and categorise or even better highlight them as follows:

Green = This expenditure is vital for my business. There is no cheaper, suitable alternative. A green example may be wages, insurances, accountancy fees, and bank charges.

Red = This means you do not need these outgoings in your business. This may be a subscription or cost that is no longer required. Cancel red payments with immediate effect.

Amber = You need this expense for your business to operate but there may be a cheaper alternative. Amber payments could include, your IT provider, advertising costs and software subscriptions. Set some time aside to review alternative options for all items highlighted in amber.


Reviewing your outgoings regularly is a great way to ensure that your business is as lean as possible and to make sure you monitor and maintain your cash flow so that you are not wasting money and there are no leakages within your business.

There is a saying in business “what’s measured is managed”. The thinking is that if you don’t track something, you can't improve it. Without accurate data, it would be impossible to make informed decisions or set realistic goals.

Other cost-cutting exercises

Other cost-cutting exercises to put cash back in the business or free up cash could include the following:

• Van stock – Do your engineers have stock in their van? If so, do they need so much? Can the stock be run down instead of replenished? In which case you’re freeing up some quick cash.

❗ Just in Time (JIT) – JIT is a management strategy that ensures you’re ordering materials when you need them. The Just In Time management strategy was first developed by Toyota in Japan. The goal of JIT is to produce only the amount of items that are needed, when they are needed, and in the quantities that are needed. This helps to minimise waste and avoid the costs associated with storing excess inventory.  A lot of the items needed for boiler repairs are stocked in merchants so there is no need for a plumbing and heating business to hold stock in their vans when a near by merchant has what you need.

• Bounce Back Loan – Bounce Back Loan repayments have become a lot more fluid and flexible and it is now possible to reduce your monthly repayments for 6 months by paying interest only. This option is available up to 3 times during the life of your Bounce Back Loan. If you are experiencing immediate cashflow problems you may want to reduce your payments temporarily.

• Insurance Premium – Another cost-saving exercise you can do is review your insurance premium. I’ve recently found out that brokers can receive in the region of 20 to 40% commission on your insurance premiums (for motor fleet insurance the commission tends to be 10-15%). I’ve come across an insurance company called Insuristic that wants to change this. They don’t take a commission from insurers to arrange your insurance. Instead, they obtain quotations from insurers that are net of commission and charge a low fee to arrange your insurance. This is also more tax effective as unlike commission, fees are not subject to Insurance Premium Tax. The result should mean you save a lot of money on your insurance, so it’s worthwhile asking them for a quotation.

Set yourself a quarterly reminder to review your business bank account statement

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