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Cash, Measurements & Accountability
Cash, Measurements & Accountability
Business MentorsPhillip Rosebrook JR, CR
www.businessmentors.net
MeasurementsMeasurements
• Role of objective measurements in management • Growth without measurement• Foundation
• Measurement Tools• File Management program• Accounting program• Xactimate
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are needed to see this picture.
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Database ProgramsDatabase Programs
• Details:• File management • CRM• Management performance• Marketing reports and accountability
• Database programs that allow you analyze and parse data
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AccountingAccounting
• Accounting programs used for job costing, key financial reports and cash reporting
• Look to integrate software applications but financial information from Accounting
• Many small business owners do not understand and not use financial statements
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Accounting ReportsAccounting Reports
• Profit and Loss• WIP • Accrual• Standard chart of accounts• Depreciation
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Balance SheetBalance Sheet
• Statement of what you owe and what you own
• Banker’s yardstick• Expresses your finacial health
• Proper balance shows business acumen
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Accountability ReportsAccountability Reports
• Monthly • Balance Sheet
•Key ratiosCurrent 1.3 - 2 (range)Debt to Equity - 1:1
• P&L • A/R and A/P• Cash flow reports• Closed Job costing reports
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Financial ReportsFinancial Reports
• Weekly reporting• WIP Summary• Job costing report• New sales and invoicing
•Break by PM•Goals •YTD and MTD compared to goals
• Cash Status • A/R
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Key MeasurementsKey Measurements
• Job Costing• By individual• By job type• In progress• Completed• Budget variance
• Sales• By job type• By individual• Compare to goals
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The King!The King!
• Cash• Weekly cash projections
• A/R Reports weekly at least
• Measure turns and compare to goals
• Collect from a position of strength
• Manage and budget capital purchases
• Where do profits go?
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Strategies for Speeding CashStrategies for Speeding Cash
• Ask and Collecting from strength• Types of jobs• Have a cash plan for jobs and implement
• All have some downside
• Close jobs• Manage the schedule - Deposits and deductible
• Billing and invoicing• Profitability• Subcontractors and materials
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Banking RelationshipBanking Relationship
• Reality of cash in restoration• A/P and payroll - 30 days and less
• A/R 40 days and over depending on the company
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BanksBanks
• Where is there money?• Understand your financials - esp Balance Sheet -the bankers do
• Accurate and timely financials
• Won’t lend $ when you need it• Track record and consistency• Relationship built on trust• A new dynamic and future risks
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Your Banker - Your PartnerYour Banker - Your Partner
• Educate on Business• Growth plan and strategy• Vision • Risks • Margins and potential• What you will do with the funds• Difference from the construction industry
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What do you want?What do you want?
• Use your loan - dedicated funds
• Not for capital purchase• Operational cash
• 30 days revenue• 80% of current receivables
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Capital Expenses and CashCapital Expenses and Cash
• Stick to your budget
• Understand the ROI
• Rent• Lease• Bank Financing - not operating line
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AccountabilityAccountability
• Subjective vs Objective • Clear Expectations• Be accountable for your communications
• When, where and how do measurements take place
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What to MeasureWhat to Measure
“What gets measured gets done” Tom Peters
• Sales• Invoicing• Cash • Customer service - every job• Gross Profit• Breakeven
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Figuring BreakevenFiguring Breakeven
• BE = overhead/GP• Example
$100,000 overhead50% GP$200,000 sales
Does not include Balance sheet cash entries
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SalesSales
• Sales backlog helps see the future
• Start with a goal - definition• Individual• Division and work type• Include change orders and supplements
• Review every week• Sales meeting
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InvoicingInvoicing
• Focus on Revenue generation• Complete jobs timely • Measure weekly • Leads to cash generation and profits
• Quantifies production • Should mirror but lag sales
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CashCash
• Weekly planning • Banks provide flexibility • Do not create bad habits
• Money in vs money out • Budgets and expectations• Mortgage companies, third parties and delays
• Draw schedule, progress payments
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Customer ServiceCustomer Service
• Most important measurement in company
• Start with training and strategy - Strategies for Success class
• Post job survey• Progress calls• Visit jobs - Trust but verify• Quantify measurements and celebrate success
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Gross ProfitGross Profit
• Budget• Measure in progress• Accounting function• Weekly in progress• Monthly completed jobs• Sort by estimator and job type• Guidelines - cost based pricing and price based costing
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Improving MarginsImproving Margins
• Travel • Materials• Shop time • Poor project management• BUDGET!• Completion• Subcontractor pricing• Not always the estimate
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Benchmarks & MeasurementsBenchmarks & Measurements
• Financial• Overhead - 25-35% of revenue• Marketing - 2.5 - 5% of revenue• Sales and production - 10% and 25%
• Other measurements• Turns on A/R - 40--60 days
•Rev/A/r = number of turns•365/# of turns = Av Days
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AccountabilityAccountability
• Clear expectations• Frequent feedback
• Formal• Informal
• Fair and consistent• Based on Objective measurements
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Employee ProfilingEmployee Profiling
Where are you putting your effort?
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Locating and Rewarding Strong Candidates
Locating and Rewarding Strong Candidates
• Strong company culture draws good people
• Internet searches• Utilize your network• Staffing group
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Rewarding PerformanceRewarding Performance
• Competitive market compensation• Bonus based on performance, service and quality
• Discretionary bonus• Carrot vs Stick • 1/2 Quarterly compensation with 1/2 paid at end of year
• Non - financial incentives
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Accountability ToolsAccountability Tools
• Put resources toward opportunity rather than problems
• Coaching for performance• Be fair, timely and consistent• Should not be a surprise • Accountability is negative AND positive
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Putting it all TogetherPutting it all Together
• Timely and accurate measurements• Clear communications• Accurate timely information• Should not grow without good reporting
• Build your company around a good office manager
• Know your baseline numbers • Know the industry expectations
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Tips for SuccessTips for Success
• Make adjustments• Get out of the trenches - use the talents of your team and create synergy
• Plan and communicate• Requires objective measurements• Put in writing - it is the difference between said and done
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Next Next
Putting it all together…