As we plan for our fifth annual Financial Masterclass, I have put together a list of the costliest financial mistakes that we have seen landscape companies make.
Here are three of them I recently discussed with a coaching client
These may seem like no-brainers to some of you, and to others they may seem difficult or complex.
If you are just starting to wrap your head around your numbers, now is a good time to master these.
(And if you have a good handle on them, then share and discuss this newsletter with your team.)
1. Dirty Monthly Numbers.
You need clean monthly numbers in order to both
- steer the ship, and to
- delegate authority to others to steer their departments.
How well can your managers track their (dept’s) financial success?
The main culprit of dirty numbers is not using true accrual-based accounting.
Definition of “Accrual” accounting: It follows the matching principle; your monthly revenues should match your monthly expenses.
Many firms think they are using accrual, but really, they are using ‘invoiced’ revenue, and it is not the same (google it to understand the difference.)
Other firms use some some combination of cash-accounting and accrual-accounting.
Any good accountant can help you figure out accrual, though ironically, most accountants will try to dissuade you. Why??
Because accountants are not business people and they do not understand the power that accrual gives you to create monthly budgets, hold others accountable and ultimately to scale your business.
The added benefit of accrual accounting – it gives you the power to compare (apples to apples) your current numbers with previous years’ results.
Note: If you want to build the salability (value) of your business, you need clean, clear accrual-based numbers.
2. Unclear Divisions.
I am working with an 8M company that is building up its maintenance division. But they have not separated their numbers yet.
They have 2 account managers in the maintenance division, but they are flying blind.
- They lack a true picture of the profitability of their accounts or department (which better software would give them).
- They lack clear Gross Profit Margin of their fledgling maintenance dept.
If you are going to grow a product line into a true division, you must separate your direct costs out and even equipment-related costs, so you can empower others to “own” their expenses and results.
Goal setting is powerful, but it backfires when you cannot pinpoint results.
3. Poor KPIs
Monthly budgets/actuals are important to confirm how you are doing.
But your managers should already know each week how they are doing, by tracking their own KPIs (key performance indicators)
Here are some common areas to track:
- Marketing, Sales
- Revenue
- Labor, Payroll, OT, non-billable time
- Job cost, Gross Profit Per Hour
- Cash, Collections
- Debt
These may seem overly general, but when you dive into a specific dept, it becomes clear which KPIs to track, and how to do so. We have helped 100’s of companies set up their dashboards.
You can also track employee based KPIs:
- Safety
- Unfilled Positions
- Issues / Go Backs
- Satisfaction, Retention
You get the picture.
Your Challenge – Grow your financial acumen faster than you grow your revenue and labor force
As you build your company, you need to proactively build your financial skills and feedback loops.
It is critical the more you delegate.
Malpractice
Even if everything seems to be just fine now, it is malpractice to think that good times will continue without you managing the financial details and teaching your team to do the same.
The best time to plant that towering oak tree is today, while the sun is shining and everything is rosy.
Carpe Diem,
Regards, Jeffrey Scott
P.S. Save 200 per ticket!
You have 9 days left to take advantage of the early bird discount when you register for our Financial Masterclass.
Give us your numbers and we will tell you how you compare.
We also offer a 4 for 3 discount.
Register for our Financial Masterclass before Nov 21 and save 200 per ticket
