The works rolling in, the boys are busy but why is the cash flow still not improving? You’ve won a few big jobs lately but the profits were really tight, where does it all go? What happens when I am hit with a bad debt just when I’m about to pay my subbies?
These are real problems that those in the building trade are asking every day. There is so much hype around at the moment with the building trade taking off but risk is always there when it comes to running and owning your own business. Dealing with that risk is a top priority.
According to a recent article in the NZ Herald your business is most at risk when it is going through a growth “spurt”.
“Unfortunately people don’t understand the cashflow demands of a growing business. It’s when you’re actually most at risk,” Specialist Trade Contractors Federation president Graham Burke told the Herald recently.
That’s because if a firm is growing and a debtor doesn’t pay, it has higher wage or supply costs to deal with but no cash to pay. “When you’re growing you need cashflow in advance, it’s when people come into grief. It’s kind of the reverse of what people think – when it slows down your cashflow catches up for a while,” he said.
It’s important through all phases of your business from start up to exit planning to have good people and good systems. Good accounting systems rely on good accountants who can translate your financial statements to help identify areas that need action. It could be a review of margins and costings or it could be wages and expense analysis.
Money management reports will tell an accountant what jobs are making money or if your margins are too squeezed. They are qualified to tell you what jobs are profitable, they can help you improve cash flow and offer sound strategic advice. It’s the solid foundation that will keep your business running.
Reporting on objectives and goals can be achieved in real time and you don’t have to trawl back over messy and unreadable paper work to try and work out a) how long did we really spend on that job b) was that job profitable or did we actually lose on that one c) what jobs pay the best and therefore which jobs should I target.
It’s imperative to work with great people and great systems if you want to keep your head above water and get ahead. We know health and safety talks a lot about – eliminate, isolate and minimise. When it comes to making money you need to apply the same to eliminate any risk to your business.
