We’re Busy – So Why Isn’t There Any Money in the Bank?

You’re flat out. The phone is ringing, jobs are booked, invoices are going out and everyone seems busy.

But then you look at the bank account and wonder:

Where has all the money gone?

It’s a frustrating position for any business owner – and being busy doesn’t necessarily mean your business is making good money.

Turnover isn’t the same as profit

It’s easy to focus on sales. More jobs, more customers and more invoices should mean more money, right?

Not necessarily.

If your costs have increased but your prices haven’t kept up, you could actually be working harder for less.

Wages, fuel, materials, freight, insurance, power and other overheads can quietly eat into your margins. A job that made good money a year or two ago may not be nearly as profitable today.

Do you know which jobs actually make you money?

This is particularly important for trades, contractors, manufacturers and other businesses that quote or price individual jobs.

You might know what you charged the customer – but do you know what the job actually cost you?

Once you include materials, staff time, subcontractors, freight, vehicle costs and other expenses, was there enough left over?

Good job costing and reviewing completed jobs can highlight where money is being made – and where it's disappearing.

Profit and cashflow aren't the same thing

Your accounts might show a profit while your bank account tells a very different story.

Customers may owe you money. You might have purchased stock or equipment. GST, PAYE or income tax may be coming up. Loan repayments and drawings also affect the cash available.

That’s why looking at your profit and loss alone isn't enough.

A simple cashflow forecast can help you see what's coming before it becomes a problem.

Are you charging enough?

This can be an uncomfortable question, particularly when customers are price-conscious.

But avoiding a price increase doesn't make increasing costs disappear.

Rather than guessing, work out what your products, services or jobs really cost to deliver and what margin you need to make the business worthwhile.

Sometimes a small change in pricing or margin can make a significant difference.

Get beyond the annual accounts

Your financial information should help you run your business – not just tell you what happened last year.

Regular reporting can help answer questions such as:

• Are our margins getting better or worse?

• Which jobs, products or services are most profitable?

• Are wages increasing faster than sales?

• Where is our cash going?

• What does the next three, six or twelve months look like?

• What happens if sales fall, costs increase or we take on another employee?

You don't need complicated reports full of accounting jargon. You need useful information that helps you make better decisions.

Busy should be worthwhile

If your business is busy but the bank balance doesn't seem to reflect all that hard work, don't just assume that's the way business is at the moment.

There may be opportunities to improve pricing, margins, cashflow, job costing or the way you monitor your numbers.

At Cross Group, we like getting behind the numbers and helping business owners understand what's really happening in their business.

If you're working harder than ever but wondering where the money is going, come and have a chat with us.

Sometimes a fresh look at the numbers is all it takes to find out where the pressure points are – and what you can do about them.