Cash Flow - The Cornerstone of Your Business

Welcome…

• Relax• Be Open – take notes, ask how?• Participate – share• Link to slides –

slideshare.net/tradeinsights

Top 7 Key Frustrations for Many Trade Businesses…1. Working too hard for little/no remuneration2. Working under too much stress/pressure3. Too much time in the business – missing out

on family and lifestyle4. Staff issues5. Inconsistent work/jobs6. Chronic cash flow7. Constantly chasing their tail – no let up!

Over the lifetime of a business…• Only 39% are profitable• 30% break even• 31% lose money

Challenges…

Does it get any easier?

To think about…• If you don’t understand your numbers you

don’t understand your business.• Understanding vs. Doing• Mange your money wisely and you will have

more money to manage.• 80/20 – Emotion vs. Mechanics

The Oh C&%# moment!

What are the consequences?• Stress – Loss of Sleep,

Relationships• Reputation/Integrity• Staff leave• Credit rating• Insolvency/Closure• Bankruptcy

Example –Pre AwarenessDay 1 - Get the job Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account) Day 11 - Complete the job & pay the team Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days Day 44 - Receive payment from client

This equates to possibly 37 days negative cash flow

1. Understand the causes2. Create a cash flow philosophy3. Create separate buckets4. Get super profitable5. Increase money coming in6. Delay money going out7. Prepare for shortfalls

The Steps to Take…

1. Understand the causes?• Poor Awareness/Money Management • NO measurement/understanding• NO cash flow projection• Unaware of break even

• No cash reserves

1. Understand the causes?• Declining sales• Declining profit margins• Not charging enough• Too much WIP (Work In

Progress)• Poor efficiencies/inefficient

team• Poor Productivity/Focus

1. Understand the causes?• Delays in getting money in• Delayed invoicing• Poor payment terms• Bad choice of clients•Paying suppliers too quickly•Overheads too high

• Poor business model

What is NOT the magic solution?

More income is NOT the magic solution – sometimes just the same challenges with more zeros!

2. Philosophy…• Belief System (B.S.)• Focus• Philosophy• Psychology• Money flow and allocations

3. Managing the flow…

4. Increase Profits• Get more clients/customers• Increase average job value• Increase prices/charge out• Add MASSIVE value = Repeat & referrals• Increase efficiencies/productivity – track & measure• Let go of non performers• Select better customers/sack slow payers

5. Get Money in Faster• Firm up payment/trade terms with customer• Deposit - use mobile payments/EFT• Progress payments • Invoice/Payment on completion - Mobile

payment/EFT • Make it easy for clients to pay• Incentivise to pay early/on time• ASK if necessary• Invoicing/debtor system

Automate…

• Take full advantage of terms – don’t pay too soon• Negotiate payment terms with suppliers• Communicate always – if there is going to be a delay• Review ALL expenses quarterly

Insurance Electricity/Phone Salary/HR – Get or Keep

6. Delay Money Going Out

7. Prepare for shortfalls• Not if, when• Apply for overdraft/credit in advance• Credit card

Example –Pre AwarenessDay 1 - Get the job Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account) Day 11 - Complete the job & pay the team Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days Day 44 - Receive payment from client

This equates to possibly 37 days negative cash flow

Example –Post AwarenessDay 1 - Get the job and receive 10 % deposit

Day 7 - Start the job - Buy materials (50% COD, 50% on 7 day account) using deposit from client and request payment of materials before ordering (on arrival)Day 11 - Complete the job, Invoice client - (receive payment on completion or 7 days), Pay the teamDay 14 - Pay for balance of materials (50%) – out of client payment(Day 18) Worst Case - Receive payment from client This equates to a +ve cash flow or just 7 days negative cash flow (for only 50%)

Get a great team around you• Book keeper• Accountant• Coach• Mentor• Peer Group• Never stop learning

Day to day?

Who is PROTRADE United?We believe in a united effort and collective knowledge to help you find an even better way to run your business…

Trade specific solutions in…• Strategy – income, cash flow, profit, team

development• Accounting – financially well organised• Marketing – online & offline• System Integration – streamline IP into the cloud

& protected

Why PROTRADE United?Ultimately for 3 reasons…

1. To give you the luxury of an unhurried life

2. To raise the standards of trades and related service businesses around Australia

3. Decrease the anxiety and depression related deaths amongst trades business owners

Some of our clients…

Participant or Spectator…?