Equipment World Digital Magazine
Issue link: https://read.dmtmag.com/i/139700
DO YOU HAVE A HANDLE ON YOUR COSTS? Tracking costs is one part of cash flow management – the life blood of your company M Know your Business series, Part III ost contractors have no clue what their costs are, contends George Hedley, head of the Hardhat Presentations consulting firm. "They don't know their overhead, their fixed costs, or what revenue they need to bring in to pay back their debts and make a profit. It's hard to be successful when you don't know your costs." And so it's critical to find out exactly what your true costs are, advises Bob Biehl, director of construction industry services with the GBQ Partners accounting firm. "Contractors need to examine whether they really need a cost and that cost's true impact on the business." Cash flow budgeting, projections To get a handle on your true cash picture, Biehl advises, make it a habit to do cash flow budgeting and cash flow projections. These planning strategies will help you know where your cash surplus and shortfalls are during a period. If there's a shortfall, you can figure out how to generate ways to cash. If there's a surplus, perhaps you can pay down debt or buy equipment. "It helps you avoid surprises," he says. And having a cash flow projection helps your credibility with your bank. Look at your finances weekly, and then monthly, Hedley says. Have a monthly strategy session with key personnel to plot out your cash flow. Evaluate your costs every year to make sure they are necessary to run the business, Biehl says. By doing a profit projection, you are forced to look at the make up of your overhead, line item by line item, and see what is necessary. "Cost control is as much about Construction University is produced by Equipment World and presented by Case Construction Equipment continued EquipmentWorld.com | July 2013 43 EW0713_Construction U.indd 43 6/24/13 10:33 AM