Tradies have a lot to consider and here is a little “Trades help” for you to think about.
- Make sure your accounting software is set up correctly so that you can run reports which are of immediate benefit to making sound business decisions.
- Make sure your reconciliations are correct and up to date to enable these reports to be accurate and complete.
- Run a P&L (profit and loss report) against individual jobs to ensure that you are pricing the jobs correctly and making the target profit margin on each job.
- Use the P&L report to keep an eye on costs for jobs, you may be surprised.
- Make sure you invoice in a timely manner because even your best clients take time to pay.
- Run a sundry debtors report and follow up any overdue invoices, keeping on top of them keeps the cash flow going but also gives you an early warning if a supplier/client is in trouble. Consider an accounting software “add-on” that automatically sends reminders.
- If you need an urgent cash injection consider factoring some of your invoices, it will cost you a little “off the top” but often cheaper than a loan or overdraft and often doesn’t require the paperwork once set up.
- If you often sub-contract then consider sub-contractor insurance which will cover you should the main contractor go under.
- Plot your tax payments, GST, Wages, Employer returns and regular bills so you know what is due and when so that you can make sure your invoices are sent in plenty of time for that money to come in and you have some time in which to chase the overdues.
- Use your accounting software to set up progress payment invoices (or regular billings) and schedule them to go out on a fixed date.
Inventory – To help keep costs down have stock at reasonable levels, use the inventory function in your accounting software or choose an “add-on” that syncs with your accounts to make sure downtime is lessened by having adequate stock of often used pieces yet not carrying a lot of stock which is money sitting doing nothing.
Project management – Choose some project management software to help with those larger projects to:
- streamline other trades and any “subbies’
- plan purchase dates for materials so you don’t carry too much stock or forget to order
- schedule deliveries & any inspections
- schedule in any progress payment invoices. Choose a software that integrates with your accounting software to avoid double handling of invoices etc.
So in other words make sure your margins are being met, your costs are regularly being reviewed, your invoices are sent promptly and your debtors are monitored. All, or most, of this can be handled through your accounting software so set up of this software is crucial, have your accounting professional review this set up and refine to suit your business. You already pay for the software and spend the time using it so get the best use out of it – turn your accounts from a chore to a valuable business tool.
© Hughes Judd Accounting August 2016