Last week I discussed “Presenting the Best You”, making sure you always have your best foot forward. Today’s contribution to our four part “Success in 2012” series is about numbers.
You should have company and personal goals set for the year, and check them weekly or monthly to see how you are doing in reaching those goals. If you’re falling behind, you can get busy and correct the situation to get back in line with your goals. If you don’t have goals set, you don’t know you’re falling behind.
If your numbers show that you’re running ahead of your goals, make sure to give those around you who helped you get ahead of your goal a sincere thank you and maybe even a small gift of appreciation.
Know and understand both your Profit and Loss statement (P & L) and your Balance sheet. Know where the numbers come from and what they mean. Understand that a P & L for a construction related company is a bit different by necessity from other business P & Ls, so get your P & L set up properly and then keep that critter up to date. A percent of completion method of accounting will give you the numbers you need to make those good decisions. You can’t make good business decisions unless you have good data to begin with.
A forced savings account, also known as an Operating Capital Reserve Account, is mandatory for long-term survival. Stuff happens and you need a cushion to be sure that you can pay the unexpected bill. Start your OCRA by taking between 2% and 4% right off the top of every check, credit card, cash payment or refund in the door. You want about 5 to 7 months of overhead expenses on hand if you’re a remodeling contractor, and 3 to 5 months of overhead expenses if you’re a specialty contractor. An OCRA is your assurance that your bills can get paid on time, every time. You don’t want to go into debt with a line of credit to pay your bills, that costs you money and in today’s environment, a line of credit is difficult to obtain. An OCRA is an asset – a line of credit is a liability. You don’t need liabilities.
It’s important to know your numbers for your business. Make sure your financial ducks are all in a row. This applies to your business and your personal life. Understand and practice the credo, “If it is going to be, it is up to me.” No stories, no excuses, get the job done. Next week we’ll talk about getting business in the door.
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The forced savings account is also great for end of the year taxes. Most businesses do not have a fund for paying income tax at the end of the year and that could hurt them during their first quarter.
Really informative blog article.Really thank you! Really Cool.