Do you know your expenses?

Winter again.  And before you know it the inquiries will be coming in. I think one of the biggest assets we have as a seasonal business is the down time to correct things for the busy season. If this time is used properly we get the chance to effectively correct mistakes and make our businesses more profitable. If we are more profitable in the season we need to be then having the time off for a few months is more manageable. Some of the things I think people often overlook when they are reviewing their business are all the non work expenses. I was guilty of this. I used to look at time spent on the job and materials used for the job. Then I would be aware that I had some other expenses but I never really dug into them. If we are trying to be honest about what our business costs us then we must look into it.

I am not sure what you are using for accounting software and I will not pretend to know what you should use but I do think that having a conversation with your accountant about being able to access that information frequently is important. Get a software program that has an app and allows you to look into things on the fly. Set a meeting with your accountant or bookkeeper and make sure you are all on the same page as to what expenses go into which accounts. If you are all coding the expenses the same then you can work to control or reduce costs.

I think the best way to dig into what your non-site costs are would be to sit down and make a list of things you typically do not account for. Do this exercise with your bookkeeper because they will have a better sense of your expenses. Maybe you are the bookkeeper and if that is the case grab some receipts and go through a couple months to see your expenses. Do you know how much you spent on tool repairs, saw blades, drill bits? All of that goes into your costs. The more information you have the better you will do at knowing your exact operating costs. Once you get a dialed in number of what these costs are you can know this percentage and add it to your estimates. I have seen “shop supplies” listed on plumbers, electricians or mechanics invoices. This would not be a foreign concept for your customers because they have already seen that line item from other companies. 

How about your office expenses? Yes you know you pay insurance, business licence and have accounting or office supply costs, but have you considered where that expense is paid from? Do you know the percentage of your top line revenue you spend on office expenses annually? If you do not know the percentage or even the dollar value how will you be able to control or adjust or even account for this expense. Once you have started to code expenses the way you want and understand what goes into each line of your balance sheet,  you can start to account for these expenses and make your company more profitable.

I am by no stretch of the imagination an expert on this field but I do have a lot of life experience going through this. Six years ago I ran a finishing carpentry business. I would tell you I was successful. Now I believe I was not. Yes I had money and yes I paid my employees and went on trips and bought new tools but I had no idea what my expenses were. And I had no planning in place to cover these expenses. Once we started The Ultimate Deck Shop things changed. I had a business partner that I had to be accountable to. We had employees that were getting ready to make this place their career and if we had any hope of growing our business we needed to know our numbers. Shane would ask questions about our financials and I could not provide the answers. It was uncomfortable and  embarrassing to not be able to answer those questions because I was supposed to be the one who had that information. For me the inquiries were from an outside source and that helped push me past the threshold I needed. If you don’t have the ability to push across this line on your own that is fine. But look for a source to help you get there. Maybe it is setting some goals with your accountant, or discussing your business more with your life or work partner. Find a way to make yourself more accountable. Peter Drucker said “What gets measured gets managed” and your finances are included in this statement. Once you see improvement there are so many exciting results. You become aware of some expenses you had no idea you were wasting money on, and conversely you find some expenses that you are comfortable spending more money on. You will feel a sense of relief and you will feel a sense of accomplishment. This new knowledge will build your confidence. Until you start to dig into this field, you will not even know your own potential. 

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