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

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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Database ProgramsDatabase Programs

• Details:• File management • CRM• Management performance• Marketing reports and accountability

• Database programs that allow you analyze and parse data


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


Accounting ReportsAccounting Reports

• Profit and Loss• WIP • Accrual• Standard chart of accounts• Depreciation


Balance SheetBalance Sheet

• Statement of what you owe and what you own

• Banker’s yardstick• Expresses your finacial health

• Proper balance shows business acumen


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


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


Key MeasurementsKey Measurements

• Job Costing• By individual• By job type• In progress• Completed• Budget variance

• Sales• By job type• By individual• Compare to goals


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?


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


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


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


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


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


Capital Expenses and CashCapital Expenses and Cash

• Stick to your budget

• Understand the ROI

• Rent• Lease• Bank Financing - not operating line


AccountabilityAccountability

• Subjective vs Objective • Clear Expectations• Be accountable for your communications

• When, where and how do measurements take place


What to MeasureWhat to Measure

“What gets measured gets done” Tom Peters

• Sales• Invoicing• Cash • Customer service - every job• Gross Profit• Breakeven


Figuring BreakevenFiguring Breakeven

• BE = overhead/GP• Example

$100,000 overhead50% GP$200,000 sales

Does not include Balance sheet cash entries


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


InvoicingInvoicing

• Focus on Revenue generation• Complete jobs timely • Measure weekly • Leads to cash generation and profits

• Quantifies production • Should mirror but lag sales


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


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


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


Improving MarginsImproving Margins

• Travel • Materials• Shop time • Poor project management• BUDGET!• Completion• Subcontractor pricing• Not always the estimate


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


AccountabilityAccountability

• Clear expectations• Frequent feedback

• Formal• Informal

• Fair and consistent• Based on Objective measurements


Employee ProfilingEmployee Profiling

Where are you putting your effort?


Locating and Rewarding Strong Candidates

Locating and Rewarding Strong Candidates

• Strong company culture draws good people

• Internet searches• Utilize your network• Staffing group


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


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


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


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


Next Next

Putting it all together…

Documents

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