For your building and construction business, change is good: change means more customers, more revenue, more efficiency, more growth. Change is great!
However, change can be difficult to manage if you’ve not properly prepared to handle it...
Working within the building and construction industry—you, dear reader—will certainly be aware of the changes that influence your own business. Whether it’s factors that may have a more general impact, like new technologies, changing legal standards, or something more specific like the VAT Reverse Charge (and if you aren’t aware, you should definitely prepare for October 2020).
However, another issue that I don’t doubt is on your mind (and something that is constantly changing), is your cash flow.
In sitting down for a call with Jibran Qureshi, Director at Clear House Accountants (CHACC), I learnt a great deal about some of the biggest challenges facing the building and construction industry and collected the advice they offer to help businesses cope, too. And with over 10 years of experience, they certainly have a lot of valuable advice to share.
Managing cash flow in an environment that changes as rapidly as the building and construction industry, can be especially challenging. As Jibran points out:
“It’s a huge issue with construction or property clients because there’s often huge amounts of investment. It's also a project style cash flow structure, so you often get paid based on completion, so we see huge struggles with managing cash flow.”
You may be familiar with the struggle of cash flow management, but there’s a question you need to ask, that isn’t necessarily easy to answer. How well are you managing yours?
Let’s dive in to the points below and see if we can start lending a helping hand:
- The importance of managing cash flow
- Getting out of old habits
- Making use of resources
- Gaining oversight with the right tools
1. The importance of managing cash flow
There are a number of reasons why you need to pay attention to where your cash flow:
- From paying staff,
- Paying for parts and stock,
- Charging clients and organising invoices,
- To knowing how to invest in your business’ future.
These are simple enough reasons, but simple doesn’t mean acting on them is easy.
“If you were to break the problems down,” Jibran said, “generally they are very simple. But how you fix them and what kind of solutions you prepare, [and thinking] does that solution work for a certain type of business? That’s the complicated part.”
You know that there’s no one-and-done solutions to managing cash flow either: it’s an important, ongoing task. But as much as that might sound like common sense, that’s precisely what makes it so surprising to hear Jibran say that so many businesses who approach them for their services and advice, particularly in the building and construction industry, struggle greatly with efficiently managing their cash flow.
“There's always issues with cash flow. Often, it’s because they don't always value finance and initially focus too much on their product, their service, selling, or on the growth of their customers… by the time they come to finance, things are too messy.”
While it makes sense to focus on these other points—after all, selling your services and obtaining customers helps you make money—but if you haven’t laid your foundations, or are frequently plugging gaps with random solutions as fast as they appear...well, messy finances will be the least of your worries.
“We often see ‘solutions’ that sit in silos… they're just put in place to solve a gap and fix an issue. But then there's a lot of irrelevant technology in place, which doesn't actually make any sense or doesn't connect to the accounting software. So then there's a spreadsheet which gets all of the inventory software, reports download into the spreadsheet, and then you use that spreadsheet to update it into the accounting software. And….”
...Well, you get the idea, it can get incredibly messy, particularly if you’ve grown rapidly. You’ll find that “you have to untangle everything that's been entangled” and the data you accumulated can be difficult to decipher. You’ll struggle to put that information to good use. This could lead to slower growth, overspending, overcharging, or even cripple the work that you’re trying to complete for your customers.
But that’s the thing, even if you’ve grown quickly, you shouldn’t be punished for achieving success! However, it’s precisely why a productive solution should be set in place from the start (or as soon as possible), so you can proceed smoothly and grow with confidence.
This is where more modern, tech based solutions become incredibly important. Cloud based job management and accounting software, often integrated together, offer an elegant solution to solving your cash flow problems, and so much more besides and let you go on to achieve the success you want.
What that success is precisely, will be personal to your business. More customers? Greater efficiency? More effective marketing? Sustainable growth? They’re all valid goals to aim for, but without the proper management of your finances and similar tasks, you’re going to hinder yourself from achieving them...which leads us to a big hurdle that you may need to overcome.
2. Getting out of old habits:
To put it plainly, now more than ever, there’s simply a better way to do things and that’s thanks to technology. Software is everywhere and it’s incredibly accessible for new and old businesses alike.
However, it’s no secret that many field service companies operate in what’s typically considered a more traditional way. Pen and paper, or simple (we’d now call these outdated) computer programmes, rather than cloud based software that lets you perform faster, smarter, and doesn’t require you to be in the office.
What’s interesting, is that older businesses (understandably) are often the ones with the old, bad habits in place:
“The biggest problem we see is the traditional way of doing things. So something set up 15, 20 years ago, but what worked then doesn't work now. It's still being followed because that's the way it was set. The business is so ingrained in the way they do things, they resist change and you see the foundation just staying as it is. It's not being built upon properly.”
It’s important to take steps out of the dark ages, and begin making use of software. It’s a minor example, but having a system that allows you to easily connect your data and information, and so better manage a whole host of solutions, like stock scheduling, and finance will let you become more efficient and organised as a result.
As an example, Jibran spoke about how CHACC are taking steps to ensure they are an innovative, digital giant and are fully aware of the benefits that a digital solution brings not just to their own business, but how it helps their customers whom they partner with achieve more too. Their Business Growth Portal is being designed to help provide legal helplines and marketing solutions, amongst other things, but all tied to the focus on helping customers care for their finances in a better, more intelligent way.
For accounting and finance, it’s clear things have changed too, so it’s wise to take advantage of the vast data that’s now available. Jibran explains that the days of having a dedicated bookkeeper using pen, paper, and keeping stacks of files is all but gone and if you’re still doing that, well...it’s time to upgrade:
“If you go back 15 years, accounting was done on a piece of paper, so we had all these ledger books and you used to do accounting on a piece of paper. If you look at accounting now, things have changed, it's a lot of projections and forecasting and a lot of analytics and you know, you can look at the numbers, at modular analysis, ratios and percentages and you can use that to assess in real time how your business is performing and project how it will perform....so it's changed massively, it's given accountants tools to be able to add more value to businesses.”
Standards have changed for the better, and it’s easier to obtain complex insights. If you don’t take steps to organise yourself in a smart way, your competition certainly will. No prizes for guessing how that’ll affect you as a result of keeping things the way they’ve always been.
It’s not all doom and gloom though and making a change doesn’t have to be intimidating, but it’s important to stress the impact of not acting will have! With some simple steps, (but a lot of dedication), you can go forward and really take control of your finances and make sure your business is doing the best it can in every other respect.
Let’s run through a couple of key points Clear House Accountants offered when it comes to focusing on your finances. They boil down to considering:
3. Making use of resources
It’s important to get the advice you need, when you need it. With it, you can make a more informed decision then follow through with a successful implementation..
Let’s face it, we can’t all be experts on everything, so it’s important to know where you can get help, and realise when you need it. It’s why here, at Commusoft, we offer posts like this one: to help you gain insight and share it with you! It’s also refreshing to see we’re not alone in that endeavour, as Jibran explains for CHACC:
“We're educating our customers on using finance to be able to cover the gap of cash flow and make sure they have enough information to do whatever they're doing. So, we identify the purpose of the cash flow and match them to the right broker or finance provider and enable them to take control of their cash flow”. The aforementioned Business Growth Portal is one method of taking that further, but it ties to Jibran's goal of “enabling our clients to become the best in the world”.
Simply taking the step to seek and ask for help doesn’t have to be difficult and it can inform the decision you need to make, making them less risky and overall, smarter. There was a neat summary of practical steps you can take, and it ties to the focus of setting up an efficient foundation, one that is made up of:
- A good accounting system,
- A good chart of accounts, and
- A good bookkeeping system;
“If you put all of these in place,” Jibran goes on, “and track the KPIs of your business, then they're going to help you assess the decisions you're making and judge that they’re actually benefiting you in the long term.”
From there, you can continue to improve upon the data you have and make wiser choices. Managing cash flow is about obtaining insight, and to gain the most accurate insight, especially in today's market, it requires you to seek professional advice, but also to make use of quality software and analytics.
4. Gaining oversight with the right tools
We’ve spoken many times before about the advantage digitalising your business can bring, but what makes it more profound is having spoken to other businesses who agree. It’s significant to note it’s not just job management software you want to consider helping you take on automation, but finances too.
With digital tools like these in place, you can set yourself up to run your business in a more productive way. It doesn’t mean you’re going to be doing less work-quite the opposite-it means you can do more work, in less time, therefore you’re more efficient.
“Having a good accounting system, cloud system which gives you access to your real-time data.”
We spoke in a previous post about managing stock control in much the same way and it counts for things like managing appointments, scheduling, and more, particularly if you’re involved with things like on-going maintenance, or long projects that require a lot of planning and insight.
Knowing that you can access the information you require quickly, easily, and remotely, but also share that knowledge with your team, no matter where they are, is immensely valuable.
“Numbers do paint a picture and therefore it's very valuable to build this from day one and use that to your advantage. That's what we tell our clients so that when things start getting a bit murky, you have visibility in terms of what you can do. It'll give you a lot of clarity.”
Statistics like this can play play a massive role in how quickly a business grows and give insight into how they should invest their money and make more relevant decisions to help them grow. With these things in place it becomes evident very quickly the value of investing in these services, and we’re not talking just about money, but time.
Time is a major factor as to why some businesses don’t want to tackle change, but time is precisely what you’ll also save yourself in the long run if you take the right steps to managing not just your cash flow, but a whole host of tasks besides. Time, after all, is money.
“As an example, with an accounting software, you know, a plumber can go to a premises, get the work done, issue an invoice electronically within five seconds and it's all done. And then the money can be collected immediately with a wireless card payment facility. It's becoming faster and faster and more efficient.”
We’re sure you’d agree that you’d rather wow a customer with a fast flowing service and an efficiently managed project, than have to slog through, risk losing data, and disappoint them.
Jibran’s insight and experience was impressive to witness, but what we wanted to highlight as a conclusion is the need to have a clear view of your finances and how accessible digital solutions are to implement. These have a proven track-record of helping businesses grow, as Jibran has seen himself.
It’s a simple point, but the right solution can bring amazing benefits. You may be doing a lot of things right already, but it’s often the case that there’s more you can do to be better, and if you want to make sure you’re managing the cash flow of your business consistently to cope with the inevitable peaks and troughs, then our advice will surely be of help.
If you’re keen to learn more about how to grow your business and manage tasks through automation, we’ve just the thing for you with our Complete guide to Automation. Click below to check out our page, and access more content and resources, for free!