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Have you looked at your Profit & Loss (P&L) statement lately?
What about the old balance sheet? Do your employees generate work reports from the field so that you know what your costs are for that day’s work? Do you keep a continuing record on all job costs? If you answered “no” to any of these questions, you are working blind.
In my experience, smaller companies don’t even have P&L statements and the owners just hope the checks outnumber the bills. Medium-sized companies do, but rarely look at them, and large companies have them but the information never gets down to the operations folks.
Your P&L statement reflects a period of time, like a quarterly, a monthly or mid-month—however you’d like it. The balance sheet is a ‘picture’ in time of your business and indicates long- and short-term indebtedness, business equity, year-to-date profits and so much more. Obviously, the daily work reports should indicate what work was completed in detail, number of man-hours it took to do the work, travel time, jobsite and overall cost of that job.
In this writer’s opinion, all of the above is required and should be reviewed often, no matter the size of your business. I just spoke with a gentleman in the Midwest and asked him those questions, and his answers were, “No, no, no.” Sometimes we forget we are in a business. He was interested in a consultation but was unable to give me very much information, other than it appeared he was paying out more than was coming in, and so he assumed that he was losing money.
Well, you must manage your business, not run it, and you can best manage it with information you should be generating. We are in a seasonal business, and income and expenses go up and down; you must know when this happens in order to ensure profits. Typically, we make more money in winter months and lose or make a little during summer . . . the companies that track this information are profitable every month. How are you doing, or do you know?
So, maybe it’s time to use that computer you bought and start with a financial program that will give you the information you need. Or hire a CPA, not an accountant. Give that person your financial information regularly and get those P&Ls and balance sheets no less than monthly. You can always do graphs as well and know where you are winning or losing. And don’t forget daily job reports from the field by job, and keep cumulative records. It’s been said that knowledge is power! How powerful are you at managing your own business? Call me, I can help.
EDITOr’S NOTE: Bill Phagan is president of Green Industry Consulting, Inc., and can be reached at 813.310.1108 or e-mail to email@example.com or his website at www.greenindconsulting.com.