Improve business performance for your Trade Business by plugging the leaks
If you are working hard and expected there to be more money in your bank account, then a quick way to improve this situation is to make sure you stop any leakage of profit from the business.
Here are three things to check regularly to improve business performance.
1. Know your profitability
- Are you billing out all labour, materials and operating costs?
- Have all subcontractor hours been charged for and all materials included?
- Are you charging the right margin? Even if you run a do and charge business you need to manage project performance and make sure all expenses are charged to the job and that labour is being charged at the right rate, with enough margin.
- For quoted jobs are they tracking as you expected?
- Don’t forget to include all business expenses, not just those directly related to the job.
- If you haven’t got a system in place to manage this, it is a good idea to get one, so profitability and business performance can be regularly and easily managed.
2. Manage money you are owed
- Don’t let your outstanding invoices impact your cashflow or become a larger cost to your business.
- Make sure you have a collections process in place so that you don’t waste hours chasing debt.
- If you are using an overdraft (or worse don’t pay invoices) to manage the increases costs associated with expanding your business and have money owing then this is profit leaking from you business. This money needs to be funding your business growth, not contributing to your costs.
3. Review your expenses.
- Make sure that all the expenses you have are necessary for the business.
- Check your statements from suppliers for accuracy
- Check your subcontractor invoices are consistent with time on the job or their quote.
- Ask your suppliers for a price review (especially if your business has grown) and get your business on account.
- Manage your stock levels so that you don’t carry excess stock.
- Cancel any old subscriptions and expenses that are not relevant any more, even if they are small.
By keeping an eye on these simple steps you will improve business performance for your trade and construction business. A review of business performance needs to be done regularly. Set up a system that will allow you to do this easily.