Articles written by guest contributors
Tired of spending money on unexpected costs?By Weston Zimmerman
In the peak season, demands come at you from every direction, and sometimes, the easiest thing to do is to just throw money at the problem. Which works – as long as your budget accounts for it, and you’re not spending money that was supposed to be your profit!
My goal for today’s article is to prompt you to do one thing: Review your expenses so far this year and compare them against your budget. Your goal is to find any actual expenses that are higher than what you had budgeted for before the season started.
For example, you had anticipated spending $20k on fuel this year. Let’s say you’re already 4.5 months into your 12 month work year, and you’ve already spent $14k. If you do the math, you can get an idea of what you’ll actually spend by the end of the year.
$14k divided by 4.5 = $3,111/month x 12 months = $37,333 (if you continue spending at the same monthly rate for the rest of the year). That’s $17,333 over budget.
Who pays for that $17k difference? You do. What was supposed to be your profit goes to pay for that.
And we’re only talking about a single line item in this example so far. If you get a couple of line items that are off… this is where you get to the situation where you work like an animal all year and get nothing to show for it. Less profit than you anticipated. Or worse, no profit. No capital left to invest in your business growth, equipment or to hire someone to share your workload. So you work more hours and have no time to free up your brain energy to focus on the business, not in the business.
It’s easier to end up in this situation than not. Another way of saying it is it takes an intentional focused effort to not spend the money that was supposed to be profit on expenses. That “effort” means: checking your actual company expenses against your projected budgeted expenses, and adjusting and tweak as needed.
Growth & cash flowI have a friend that grew his business in a short amount of time. He doubled his gross revenue in under a year. What happens when you double your revenue? Well, your business grows which means your expenses also grow.
My friend didn’t do the “budget check,” and by mid-season, he was having a cash flow crunch. Why? He was spending money that was supposed to be profit on increased overhead expenses that were needed to fuel the growth.
And, the quotes he was sending out were based on markups and calculations of his now out-of-date budget. Meaning every quote he was sending out was not priced correctly, and every job he won just compounded the worsening situation. The quotes were not priced high enough to both cover his increased overhead expenses and produce a net profit.
Thankfully the solution was easy. We did a quick analysis of the budget his quotes were based on, compared that to his actual expenses, found the issues, tweaked them, and updated the budget.
Now the next quote he built was in tune with reality based on an accurate up-to-date budget and priced to cover all expenses and generate a net profit. Cash flow problem solved.
So, don’t wait until you have a cash flow problem to go into firefighting. Just check your budget against actual expenses on your Profit & Loss statement from QuickBooks every so often throughout the year, and problem-solve any issues. This avoids a ton of stress and headache.
If you are constantly tight on cash flow, it’s very likely you are experiencing this exact scenario. Tight cash flow is a symptom of budgets being out of whack, which puts your quotes/pricing out of line.
For help with your company, email Weston@SynkedUP.com, follow on IG at @synkedup, call (814) 383-1901 or visit SynkedUP.com. Weston Zimmerman is CEO & co-founder of SynkedUP project management software and app. SynkedUP helps contractors know and track their numbers, estimate and job-cost jobs, and manage their jobs efficiently. Check out his podcast "The Cost of Doing Business."