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Cash, Measurements & Accountability

Learn about the importance of objective measurements in management for business growth and success. Explore measurement tools, file management, accounting programs, and database programs for data analysis and accountability.

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Cash, Measurements & Accountability

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  1. Cash, Measurements & Accountability Business Mentors Phillip Rosebrook JR, CR

  2. Measurements • Role of objective measurements in management • Growth without measurement • Foundation • Measurement Tools • File Management program • Accounting program • Xactimate www.businessmentors.net

  3. Database Programs • Details: • File management • CRM • Management performance • Marketing reports and accountability • Database programs that allow you analyze and parse data www.businessmentors.net

  4. Accounting • 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 www.businessmentors.net

  5. Accounting Reports • Profit and Loss • WIP • Accrual • Standard chart of accounts • Depreciation www.businessmentors.net

  6. Balance Sheet • Statement of what you owe and what you own • Banker’s yardstick • Expresses your finacial health • Proper balance shows business acumen www.businessmentors.net

  7. Accountability Reports • Monthly • Balance Sheet • Key ratios • Current 1.3 - 2 (range) • Debt to Equity - 1:1 • P&L • A/R and A/P • Cash flow reports • Closed Job costing reports www.businessmentors.net

  8. Financial 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 www.businessmentors.net

  9. Key Measurements • Job Costing • By individual • By job type • In progress • Completed • Budget variance • Sales • By job type • By individual • Compare to goals www.businessmentors.net

  10. 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? www.businessmentors.net

  11. Strategies 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 www.businessmentors.net

  12. Banking Relationship • Reality of cash in restoration • A/P and payroll - 30 days and less • A/R 40 days and over depending on the company www.businessmentors.net

  13. Banks • 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 www.businessmentors.net

  14. Your 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 www.businessmentors.net

  15. What do you want? • Use your loan - dedicated funds • Not for capital purchase • Operational cash • 30 days revenue • 80% of current receivables www.businessmentors.net

  16. Capital Expenses and Cash • Stick to your budget • Understand the ROI • Rent • Lease • Bank Financing - not operating line www.businessmentors.net

  17. Accountability • Subjective vs Objective • Clear Expectations • Be accountable for your communications • When, where and how do measurements take place www.businessmentors.net

  18. What to Measure “What gets measured gets done” Tom Peters • Sales • Invoicing • Cash • Customer service - every job • Gross Profit • Breakeven www.businessmentors.net

  19. Figuring Breakeven • BE = overhead/GP • Example $100,000 overhead 50% GP $200,000 sales Does not include Balance sheet cash entries www.businessmentors.net

  20. Sales • 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 www.businessmentors.net

  21. Invoicing • Focus on Revenue generation • Complete jobs timely • Measure weekly • Leads to cash generation and profits • Quantifies production • Should mirror but lag sales www.businessmentors.net

  22. Cash • 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 www.businessmentors.net

  23. Customer 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 www.businessmentors.net

  24. Gross 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 www.businessmentors.net

  25. Improving Margins • Travel • Materials • Shop time • Poor project management • BUDGET! • Completion • Subcontractor pricing • Not always the estimate www.businessmentors.net

  26. Benchmarks & 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 www.businessmentors.net

  27. Accountability • Clear expectations • Frequent feedback • Formal • Informal • Fair and consistent • Based on Objective measurements www.businessmentors.net

  28. Employee Profiling Where are you putting your effort? www.businessmentors.net

  29. Locating and Rewarding Strong Candidates • Strong company culture draws good people • Internet searches • Utilize your network • Staffing group www.businessmentors.net

  30. Rewarding 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 www.businessmentors.net

  31. Accountability 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 www.businessmentors.net

  32. Putting 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 www.businessmentors.net

  33. Tips 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 www.businessmentors.net

  34. Next Putting it all together… www.businessmentors.net

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