Cash Flow

Construction Industry

Leave a Comment / Bookkeeping, Business Management, Cash Flow / By / November 2, 2021
Facebooklinkedinmail

Why is Construction Accounting Different?

  • Construction is project driven. Construction workers are contractors who operate their business around projects with billing, production, or labor. The projects are scattered and occur on different sites and locations. Different sites often have wage differences, equipment, and transportation costs.
  • The length of contracts can vary and lag payment can be an issue here.
  • Costs need to be accurately tracked to each project.
  • Orders and plans can change abruptly and these changes need to be tracked diligently. Changes in the construction scope, design, site conditions, or even the project schedule have the ability to make or break the budget.

Ask For Help

As the financial operations within a construction company can get very complicated very quickly, sometimes it’s best to get a little assistance from someone who’s done it all before. Outsourcing a bookkeeper to keep and maintain your financial records is a great way to ensure every process is being performed accurately and meets legal obligations. If you do outsource, however, ensure that the bookkeeper you choose understands the complexity of construction bookkeeping and has experience in the field – as in, bookkeeping-wise.
 
In the case of small businesses, you may not have the budget to outsource. In this case, you may conflate the bookkeeping duties with the administrator’s role – this runs the risk of causing errors within your records as admin staff do not always have the required skill set for bookkeeping. Avoid losing track of your expenses by getting initially set up with an understanding in bookkeeping processes required for running a construction business by having a consultation with a bookkeeper, to learn the ropes. At Shoebox Books, we can provide small businesses with advice on maintaining their financial records, and if you need more help, you can retain a bookkeeper on an ongoing basis. It really depends on your needs.
 
The important thing is that if you’re struggling or losing track of your finances because your business is getting too busy (which is a good thing – well done you), then it’s important to get help with your bookkeeping. Invest in getting it done right so that you have one less thing to worry about.

Keep In The Loop

As a business owner, you most likely already do know the ins and outs of your business; however, as businesses grow and expand and get busier, owners sometimes take on a more managerial role and sometimes lose focus of smaller operations as they concentrate on the bigger picture. Changes in orders, contracts, and plans come often and quickly in construction and can sometimes mess up budgets and financial records – that’s why it’s important to stay on top of all of the jobs running in the background. A great step for ensuring you’ve got all your projects (if there’s more than one) in sight is by going digital.  Use a digital tracking system for projects and orders, and ensure that your project or site manager (if not yourself) keeps in regular communication with you and all workers. There are many great online platforms for project management; however, some can be more geared towards digital jobs. This website provides some resources to help you get started, if you’re looking for a good project management system.  Ultimately, to keep in the loop with all of your ongoing and upcoming projects, regular communication and meticulous organisation is key. Having a clear picture of what’s happening with each project allows you to keep track of material and labour costs day by day, allowing you to manage each budget better.
 
shoebox bookkeeping business essential

Keep a Digital Trail

On top of turning to the internet to help you manage projects and tasks needing to be done, consider going cloud-based for your financial reporting as well. This saves a lot of time and effort (and paper) down the track, especially during tax time. Going digital also helps with meeting financial obligations in the case of an audit; the ATO stipulates that businesses must keep all financial records for five years (some for longer depending on the nature of your business). Going digital can be as easy as utilising an online storage drive (like Google Drive, OneDrive, or Dropbox) and uploading your files. Microsoft and Google also allow you to use their office tools online so that all of your files automatically back up to the cloud. Everything is one place and you can access it from any device – making it easy for you to manage the financial side of your business. You can also take it one step further and get really into construction bookkeeping by investing in accounting software.

Using the Right Accounting Software

Accounting software – also referred to as bookkeeping software – provides a great virtual hub for all the little jobs necessary in business finance. You can manage payroll, invoices, and expenses, all in one place, and your data will be safe and secure online. We’ve previously talked about some of the most popular accounting platforms, which we shared in this article. For novice users of accounting software, Shoebox Books provides guidance on how to streamline your financial processes using the popular bookkeeping platforms Xero, MYOB, and Quickbooks. Get more info here.

Don’t Dig Yourself Into a Hole

Shoebox Books Bookkeeping specialises in solutions for tradies and construction businesses. The pricing is fixed, and our services are mobile, ensuring your BAS is lodged correctly and on time. To learn more about our services, get in touch with us by sending an enquiry today.

Improve your cash flow

Assess your company’s financial health to see if there are ways to improve cash flow. Can you charge clients a deposit or encourage payment up front to increase cash flow? Are there products you sell or services you provide that bring in revenue more quickly than others? Are there ways to save money that won’t hurt your business in the long run?

It can be tempting to eliminate staff, but when things are good you’ll just need to hire employees again. Doing so costs time and money. See if you can find small ways to save money that won’t negatively affect your business when it starts booming. Cutting overtime, for example, can save you money without losing staff.

Make sure you can account for every dollar your business spends. Don’t hide from creditors, communicate with them to find out if you can restructure your debt or extend your terms. Free up as much money as you can without setting yourself up for failure when things turn around.

Final thoughts

Chances are your business will go through tough times at least once. It’s important you take action to help get you through it, rather than crossing your fingers and hoping the difficulties pass.

The steps you take during these challenging periods will help you, but they can also help set you up for increased success in later years. 

Got a question? Please don’t hesitate to get in touch.

7 Business Strategies to help you Thrive in 2021

Leave a Comment / Bookkeeping, Business Management, Cash Flow / By / November 2, 2021
Facebooklinkedinmail

There’s no doubt that your inbox, phone and TV have been inundated with news regarding the current situation in the world. Mostly, this information is split into two categories; health and finance. These two topics are inseparable in the foreseeable future, which doesn’t seem that seeable, right now.

In a far-from-typical year, 2020 has literally changed our entire culture. These rapid and massive shifts make it all the more clear — business owners need to think about 2021.

To oversimplify, there are three (very) broad scenarios:

  • Situation improves:Treatments improve, people become less skittish and the economy shows real signs of life.
  • Things stay the same:Some states open, others remain a bit more shut down and the economy is a rollercoaster.
  • Situation gets worse:Economic and social measures revert to what they were closer to in the 2019.

No matter what the situation, 2021 likely comes with the need to prepare your finances and pivot your business practices.

Here are 7 tips to consider when planning the next 12-18 months.

1. Understand Your Business in 2021

Are there going to be more widespread lockdowns? Will current spending habits change back or continue? Is there any hope of normal within the next year?

The answer to all of these hypothetical questions is “no one knows.”

The unclear nature of 2021 makes understanding how the coming year plays out difficult (but not impossible). That said, there is one thing that is clear —An agile business, with a solid financial framework is far more likely to succeed in unknown economic territory.

Perhaps the most important tip is to better understand your own business. In fact, most of the following tips on this list are internal business considerations.

3 Ways to create Agility in your Business
Track metrics that matter:Up-to-date information means better decision making.

Use scalable solutions:Ensure outsourced services and software solutions are able to fit the needs of your business.
Communicate:With your customers, your staff, suppliers and your financial professional(s).

2. Create a Better Budget

You need a quality budget for any 2021 scenario. If things get better, you need to understand your cash flow in order to spend the right amount gaining new customers. It’s important to know the bare minimum you need to survive and how much cash you have for your operating expenses.

If you don’t do basic budgeting and bookkeeping, this is the year to start.

3 benefits of creating a budget
  • Gives insight into unnecessary spending
  • Knowing where the business stands gives confidence
  • Highlights any flexibility and opportunities

3. Adapt to New Business Practices

This “tip” is an entire article in waiting. There are so many new and innovative ways to run your business. Some were created due to necessity. Others were already around, but gained exposure in 2020.

Your business may stand to benefit from changing certain practices. Plus, other businesses you rely on (suppliers, service providers, etc.) have, in some cases, dramatically shifted how they do business. It helps to understand how these differences will affect your organization.

3 business practices that have changed in 2020
  • Remote work: If you’re a service-based business, it’s likely your team has worked from home (at least partially).
  • Online presence:Many businesses have shifted their focus to acquire clients and practice business online. Social advertising, content marketing and webinars have increased.
  • Niching down services:Some of the services you use may not be offered by your provider. Many are paring down in order to better serve a more niche client base.

Note:Again, your business may have to make these changes. But if not, it’s a good idea to check with the companies you use to see if their practices have changed.

4. Understand Sales Channels

With so many ways 2021 can play out, it’s more important than ever to test your customer acquisition strategies. One way to prep for any outcome is to fully understand the sales channels of your business (and industry).

Example scenario:An ecommerce business understands that Facebook ads perform better than Google ads. When sales drop, it’s better to reduce spend on Google while increasing FB ads buys. (A bonus tip is using your budget to determine how much money you have to spend to maximize FB ad profit.)

3 ways to improve sales channels
  • Figure out your current acquisition channels
  • Determine the lifetime value of customers acquired by each channel (or begin tracking this)
  • See where your competitors are spending their marketing dollars (i.e. content marketing and ads).

5. Track Key Metrics (in real time)

It’s easy to get off track when it comes to metrics. You can track too many items, the wrong items or get lagging metrics that don’t really give you the pulse of your business. Depending on your industry and market these metrics vary wildly. But there are several universal indicators to measure.

3 key metrics to track in your business
  • HR numbers:Obviously tracking payroll is a good idea, but you should also know how much profit per employee you have. Tracking people analytics by connecting payroll with your accounting provides much greater visibility. Doing so helps with staffing decisions (both positive and negative).
  • Sales/revenue:This is one top line number you should always know. How are you compared to the previous week/month/quarter?
  • Cash flow:If cash flow from one month to the next gets low, you may have an accounts receivable issue. Too much and you’re likely not utilizing money properly.

6. Use a Financial Forecast Forecasts differ from budgets.

Budgets keep you in line with your current spending. Forecasts help you predict various outcomes (kind of like our 3 scenarios). The better and more flexible your forecasts are, the more you can plan for any 2021 that may come.

A true forecast should look ahead two to five years, with assumptions based on your business model and growth plans. A financial forecast is a great task for a fractional CFO, and can be a major driver for a growth-minded business.

3 Benfits Of a Financial Forecast

An accurate forecast allows you to budget better for the coming year.
A flexible model provides better scenario planning and how you would have to change in order to deal with each possibility.
Seeing how much cash flow you’ll have shows realistic growth opportunities vs thinking too small or having “pie in the sky” goals.

7. Solidify Operations

Even if your business tends to thrive in adverse situations, it’s a good idea to check for any ripple effect. For example, an ecommerce store relying on foreign distribution. Inventory shortages are a big deal for a business who expects to sell more products over the next year.

No matter what, someone in your business ecosystem will significantly change in 2021.

3 operational details to secure

Supply chain management:Get on the phone (or in an email) with all vital areas of your supply chain. See what their outlook is, renegotiate if possible and understand if they’re ready for your needs in the coming months.
Staff level and focus:Make sure roles are clearly defined, procedures are understood and be as honest as possible about the outlook for the company.
Tech and services:Take a look at every program, tool and service you pay to use. One common problem is underutilization. Learn about all of the features and services provided to make sure you’re getting the most value.

We love equipping Business owners with the tools they need to thrive.

2021 comes with uncertainty. A nimble and agile approach better prepares your business for survival and success. And after you prepare, it’s necessary to keep tabs on each aspect of your business as often as possible.

Get your finances in order, track the most vital business metrics (in real-time) and change your approach to deal with changes and trends you see in the market. Do that, and you’ll do more than survive next year — you will thrive.

We can free up your time and get your bookkeeping off to a great start , After a discovery call with you, we will conduct a business analysis and design a customised implementation plan. so you have the financial daat about your business to make startegic decisioons. 

Should you need it, we’re here to provide ongoing support, advice and training.

4 Ways to reduce Costs and Boost profitability

Leave a Comment / Business Management, Cash Flow / By / November 2, 2021
Facebooklinkedinmail

Not Sure Why Your Bottom Line Isn’t Pretty?

Sometimes, Overspending Can Hurt Your Profitability Despite Your Record Sales.
Profitability doesn’t only come from sales numbers. And a profitable business isn’t always the one with the most customers and the highest sales.

The sign of a business profitable depends on what’s left in the account at the end of the month or the fiscal year.

It’s important to account not only for the money coming in but also the money going out. That’s why cutting costs is one of the best ways to boost profitability… assuming that you do it right.

Tip #1 – Address Material Costs

Sellers of products are most concerned with raw material costs. That’s why increasing profitability can be as simple as lowering manufacturing and or development costs. You’d be surprised at how much this move can make your business profitable.

Tip #2 – Reduce Labour Costs

Is there something in your business that you can replace with an automation system? Have you considered hiring a VA as opposed to an on-site assistant? Reducing the amount of money spent on wages can also boost profitability when you draw the line on your finances. So, evaluate the daily tasks that your team members perform and look at some of your own duties as a business owner. In today’s environment, outsourcing is one of the best ways to cut costs. It’s also one of the smarter ways to hire as you may have access to a wider pool of experts. Properly executed, you can lower costs and maintain a high level of quality with outsourcing.

Tip #3 – Manage Expenses

Many Businesses Are Overpaying For Marketing. For example, hotels may work with a variety of travel agencies even though a couple of them may be bringing in the bulk of the bookings. In that scenario, it may be a good idea to drop the non-performers. The same principle applies to all other expenses and services. If you pay for things and they don’t end up improving your business or what you offer, these may be expenses worthy of the chopping block. Needless to say, this would affect your bottom line directly.

Tip #4 – Know What Costs To Cut

If only cutting costs were simple, right?

Most business owners don’t know where to start. If you’re one of them, it’s ideal to start by performing an internal audit of your finances.

Identify where all the money comes and goes and decide what you can or can’t cut.

Tip #5 – Get Better Deals

Many industries work with vendors, which happens to be a great area to look at if you want to boost profitability.

You may already know that it’s possible to renegotiate vendor contracts, though it’s easy to be put on the back burner. Getting better deals, however, doesn’t always have to involve other vendors, as you can also leverage your relationships with existing vendors.

You can even consider changing service providers and utility contracts.

Cut Costs Smarter, Not Harder
You don’t have to make massive cuts in a single department. Even small amounts add up to significant savings if you make enough of them here and there.

These tips are particularly helpful to anyone operating a cash flow-dependent business. That said, they apply to both B2B and B2C companies looking to boost their bottom lines.

4 Tips For Getting Your Business Through Tough Times

Leave a Comment / Business Management, Cash Flow / By / April 3, 2021
Facebooklinkedinmail

If you’re a small business owner whose company hasn’t gone through hard times, that’s great but it’s likely to happen at some point. As much as we dream about being brilliant enough at business that we’ll never face slow times, there are many things beyond our control that can negatively affect our business.

It’s highly likely that the Coronavirus and it’s resulting impacts, could put some significant pressure on your business.

Here are four tips for getting your business through difficult periods so you can look forward years of business ownership.

Reach out to others

Focus on your existing customers When companies go through tough times, many owners turn their focus to bringing in new business. The downside is that existing customers are often forgotten, but those are the most efficient people to make sales to. You don’t need to stop marketing yourself to new customers, but make sure you give extra focus to the customers you already have, to ensure they remain loyal. Find out what their current needs are, how successful you are at meeting them, and what you can do to maintain an ongoing relationship. Communicate with them, and always provide exceptional customer service.

Reach out to others

Chances are, you aren’t the first person in your industry to experience tough times. Talk to other people who have been in similar situations to learn how they navigated those challenges. Ask them what did and didn’t work for them, and what they learned from the experience. Some—if not all—of their answers could be applicable to your business, or could at least inspire a solution.

Examine your marketing plan

Your marketing plan brings in new customers. Now is the time to consider fresh marketing ideas to bring in new revenue. Is there an area of your business you haven’t promoted before but could bring in clients? Is there a new way to market yourself you haven’t tried?

Examine previous marketing efforts to determine how successful they were. If they weren’t successful, stop wasting your valuable time and money on them. Use your efforts on something new

Improve your cash flow

Assess your company’s financial health to see if there are ways to improve cash flow. Can you charge clients a deposit or encourage payment up front to increase cash flow? Are there products you sell or services you provide that bring in revenue more quickly than others? Are there ways to save money that won’t hurt your business in the long run?

It can be tempting to eliminate staff, but when things are good you’ll just need to hire employees again. Doing so costs time and money. See if you can find small ways to save money that won’t negatively affect your business when it starts booming. Cutting overtime, for example, can save you money without losing staff.

Make sure you can account for every dollar your business spends. Don’t hide from creditors, communicate with them to find out if you can restructure your debt or extend your terms. Free up as much money as you can without setting yourself up for failure when things turn around.

Final thoughts

Chances are your business will go through tough times at least once. It’s important you take action to help get you through it, rather than crossing your fingers and hoping the difficulties pass.

The steps you take during these challenging periods will help you, but they can also help set you up for increased success in later years. 

Got a question? Please don’t hesitate to get in touch.