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It’s smart Daily activities that create profit or not!!!

By October 15, 2014 May 10th, 2020 No Comments

One of the great pleasures of working as an external CFO is helping the business owner(s) and the members of their Senior Management Team (SMT) ‘get’ how the financial reports tie in with what they are doing on a job by job level.

Many of the businesses we work with are what we call ‘jobbing’ businesses which means the critical success factors of the business are:

– Winning enough jobs at the right price to keep the team and machines in work. This is often in a competitive situation where “price is the most important consideration” and significant time and resource is put into tendering for work.
– Passing the jobs on to the production teams in a format that they understand so they know the scope, margin and time lines of the job. – Managing the job to scope, meeting expected production rates and capturing variations.
– Invoicing correctly and in alignment with any progress claims process.
– Collecting the money when it is due; and perhaps most importantly….
– Keeping the team engaged in the process.

Those of us who have been trained as technicians (professionals) often need to learn the financial management skills needed to run a successful business.

Having these skills is essential when in a strategic leadership and management role as a business owner or SMT member.

Our experience has been that these financial skills often need to be learned ‘on the job’ and as our client’s and their SMT members predominantly ‘work in’ the business, we are in the privileged position of being able to teach these skills to them both on the job or in training workshops.

Generally our business owners and/or SMT’s have many tasks they have to focus on in any given day and it’s difficult to keep the big picture in mind and to understand that many small decisions can have a significant positive or negative effect on the overall profit result.

To assist with keeping the big picture top of mind, we use the “AndrewGeddes.Com.Au Goal Oriented Budgeting and Job Targeting for Profit and Growth Tool” to assist our owners and their SMT’s understand capacity, productivity, pricing and margins.

Understanding the difference between Mark Up and Margin and the relationship between the two is an essential skill for exceeding profitability targets because it sets the targets when pricing on a job by job basis.

In our External CFO’s role, we tie the jobbing activity together in regular financial reports and ensure the owners and their SMT’s understand their financial performance and position.

And, as importantly, ensuring they understand the difference between profit, cash flow and financial position. Knowing the drivers that affect business value are also key learnings.

This information is discussed at regular meetings with the owner and the SMT to set, measure and adjust strategy as necessary to maximise business performance.

The financial numbers are the result of the activities taking place. The strategies that are set, therefore, are essential in helping make the ‘steering corrections’ that keep the business on course to achieving its budget.

The activities and strategies that are regularly reviewed include:

– Winning Jobs (Marketing and Referral systems…the jobs pipeline)
– Gearing (team members per director??)
– Productivity (sales per team member)
– Pricing (job yield…income per job hour)
– Job Management (under/over recoveries to initial job targets)
– Liquidity (WIP/Debtors control) Overhead management Capex/Funding

Using this timely and accurately financial information also allows the business to be bench marked against the industry as a whole and to set or review strategies that will improve business profit performance.

Probably the most rewarding aspect of the role is working with the owners and SMT’s to build a successful team, improve their leadership skills and grow a very successful and valuable business that is saleable when the time comes.

And to fast track this process we have owners and SMT’s regularly attend the AndrewGeddess.Com.Au Profitable Business Workshops.

The next workshop is scheduled for Brisbane March 25/26, 2015.

Book now to avoid missing out as numbers are limited to 20 participants.

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