Search

finances

What Makes the Production Tracker Such an Important Tool?

by

Because it Helps Keep Your Business Balanced

Recently we discussed the importance of keeping your construction business from getting out of balance. Achieving a balanced business requires paperwork and we know how construction contractors feel about paperwork.

I know, I know, paperwork is not a very exciting topic, but neither is concrete. And we all know how important concrete is in supporting a building. The same is true for paperwork and your business.

One of the three foundational piers in business is administration and finance. One of the building blocks in that pier is a Production Tracker. This tool provides valuable information for forecasting the company’s financial needs and production plans.

Wouldn’t it be helpful if you knew:

  • Which types of work were consistently the most profitable
  • How you were doing at meeting your financial goals for the year
  • When you should have the signed projects finished to stay on track
  • How well you’re doing at getting proposals signed
  • What the average price of your projects are

The Production Tracker is an Excel spreadsheet that lets you gather and track information. It has preset formulas that determine and sort the information you need to make your business more profitable.

This document provides information for:

  • Creating and recording project numbers
  • Tracking project bid amounts
  • Tracking dollars of signed proposals
  • Tracking dollars collected from projects
  • Percentage of jobs signed
  • Percentage of dollars signed per dollars bid
  • Percentage of dollars collected per signed
  • Average dollar amount of projects bid
  • Average dollar amount of projects signed
  • Average dollar amount of projects collected
  • Projected timeframe for doing signed projects
  • Projected date work should be done

This list can seem overwhelming but it’s really not.

Here is an example of what the Job List spreadsheet looks like.

Let’s go through the document and break it down into smaller brick size pieces.

Creating and recording project numbers – Having a numbering system can help you sort projects so that you can review which types and size of projects are the most profitable and what you do the most of. It may be that your most profitable ones are not the ones you do the most often. Having this type of information can help you to focus more of your attention on the right kinds of projects for you.

This Production Tracker is a place to list project numbers in conjunction with the size and types of the projects, as well as their chronological order. This document provides the numerical part of the project number specific to each project. The other portion of the project number is determined by job specific parameters that are not included on this document.

Tracking project bid amounts – Our Blueprint for Building a Better Proposal system provides the dollar amount for each project. Once a proposal has finished, the specific information to that project is entered into the appropriate cells on the spreadsheet. This information includes Job Number (column E), the Customer Name (column F), Description (column G), Bid Date (column H) and the Project Amount (column I). Regardless of the system you use for preparing proposals, you should have a dollar amount that could be entered into this document.

As each new project amount is added in the project amount column, the total project amount at the bottom will update, giving you a total dollar amount of the proposals you have done this year. Based on your company’s history, this dollar amount should give you a clear picture of where you are in relation to meeting your financial goals for the year. We will explain this further with the tracking dollars of signed projects.

Tracking dollars of signed proposals – Once a proposal has been accepted, the accepted dollar amount should be entered in the signed amount column. Initially, this amount should be the same as the amount in the project amount column. Sometimes the dollar amounts of projects are changed due to change orders. This can be either an increase or decrease depending on the change order(s).

As each new proposal gets signed the dollar amount of the signed proposal should be entered into the correlating cell in the signed amount column. Just like in the project amount column, as each new amount is entered in the signed amount column, the total dollar amount at the bottom automatically updates giving you a total of work you must currently do.

With the total of the signed amount column and the total of the project amount columns, you should be able to get a clear picture of where you are financially in relation to where you want to be at year end.

Let’s say your goal for the year was to generate a gross revenue of $400,000.00. Using the example, you can see that as of December 12th you were at $352,877.66. This is close, but not quite there. If you compare the signed amount to the project amount ($664,381.27) you will see that the signed amount is 53.11% of the project amount. Based on this percentage, to get the signed amount to $400,000.00, the project amount would need to be $754,000.00.

This information is critical to the survival of your construction business.

Your business needs to be built on a solid foundation.

We’ve covered a lot here today. In our next post we’ll pick up at tracking dollars collected from projects.

Check out this and additional business building tools and training here. If you have questions, feel free to schedule a free 30-minute business coaching call.

Portions from a previous post 1/7/23 

The “Job List” Is One of the Foundational Building Blocks of a Successful Construction Company 

Why is One of the Most Important Parts of a Construction Business Avoided So Much?

by

Because Admin and Finance are Out of the Contractor’s Comfort Zone

Most trades people like doing physical work, not paperwork. They like building things, not sitting at a desk making proposals or putting numbers in spreadsheets.

Avoiding paperwork is one of the biggest reasons construction companies struggle to stay in business.

They may be the most skilled craftsman out there but they consistently struggle to keep the business afloat. This includes things like –

  • Losing money due to under bidding projects
  • Not enough money to pay taxes
  • Can’t afford to have repairs done to the company pickup
  • Projects running over budget
  • Upset customers due to poor communication
  • Disconnection with production crews due to poor communication

An example of this is an email I received just this past week from a foundation repair contractor.

“I need help with all aspects of the business end of the business, and definitely with organization and systems. It’s easier for me to pick up a house than it is to figure out what to charge for doing it.”

All these problems can be solved with a good foundation that includes paperwork.

Whether it’s a dislike for doing paperwork or simply not knowing how to do it, paperwork doesn’t have to be as scary as it first appears.

It requires doing something different. If you keep doing what you’ve always done, you’ll keep getting what you’ve always got. (Variation of a Steven Covey quote) This reminds me of the Geico commercial where the group of young people choose to hide behind the chainsaws, rather than getting in the running car.

Recently we talked about the importance of building your business on a solid foundation. I told you that this foundation consisted of three piers, one of which is Administration/Finance. Let’s break this foundational pier down and see what it’s built of.

Administration – The process or activity of running a business or organization that includes but is not limited to –

  • Computer Systems
  • Team Member Records
  • Team Member Policies and Benefits
  • Office Support
  • Office Maintenance
  • Information Archiving and Distribution
  • Data Processing
  • Communications
  • Contract Preparation

Finance – The management of money that includes but is not limited to –

  • Budgeting
  • Invoicing
  • Cash Flow Forecasting
  • Financial Reports
  • General Bookkeeping
  • Accounts Payable
  • Taxes
  • Banking

Each of the things listed here has a mix of administration and financial aspects. A good example of this overlap is the Blueprint for Building a Better Proposal, which we’ve previously discussed in a series of blog posts and podcasts.

As we move forward discussing this foundational pier, I will share some of the different documents and processes that we’ve developed and regularly use at Timber Creek Construction.

The first one we’ll discuss is called the Job List. This is an Excel spreadsheet that serves several purposes, some of these are:

  • Generating consecutive and project specific job numbers
  • Tracking current total project bid amounts at present
  • Tracking current total signed projects at present
  • Tracking current total collected projects at present
  • Percentage of jobs signed
  • Percentage of dollars signed per dollars bid
  • Percentage of dollars collected per signed
  • Average dollar amount of projects bid
  • Average dollar amount of projects signed
  • Average dollar amount of projects collected
  • Projected timeframe needed to do the work based on annual revenue goal
  • Projected date work should be done based on annual revenue goal

We’ll dig into the Job List deeper next time.

I know, I know…this seems a little scary, but it doesn’t have to be with some help. Just remember that if your business doesn’t have a good foundation, it may not stay standing.

Check back in later to learn more about the Job List.

How To Keep A Finger On The Profit Pulse Of Your Company

by

 

Accomplished by A Weekly Profit Comparison

 

Have you ever been shocked when preparing your year-end financial paperwork and you find that profits were not what you expected?

 


You had, what you thought, was a good year. You were busy and working hard all year long. This was an unexpected and disappointing surprise. What happened?

 

There is so much required to operate a business and it’s hard to keep everything balanced. There are three support columns that hold up a company and financial health is a crucial part of one of them. If you neglect to regularly monitor finances, by the time you realize it, that support leg may be too weak to keep the company stable.

 


It’s easy to lose track of things if you aren’t intentional.


Profit and loss reports are easy to prepare, especially if you use a computer bookkeeping program. The problem I had with the profit and loss report was that it didn’t answer questions that I wanted answered, not without doing a lot of extra work. We all struggle with not having enough time to get everything done so, it gets put off and the next thing you know the year’s over.

 

Been there done that. That’s why I developed a Profit Comparison report.

 

I wanted, at a glance, to know if we were on target for the current year’s financial goals. This way adjustments could be made before the financial support leg got too weak. I also wanted to be able to see how the company’s income and expenses compared with last week or last year at any time throughout the year.


The Profit Comparison is an Excel spreadsheet that within a few minutes can be filled out and ready for review. We take information from a standard profit loss report, enter it into the proper places on the spreadsheet and with a few clicks of the mouse it lets us see what the “profit pulse” is. By filling it out and reviewing it every week we can stop bleeding before it becomes fatal.


The Profit Comparison report provides:

  • Comparison of the current Gross Profit to last week, last year and this year’s goal.
  • Comparison of the current Overhead Expenses to last week, last year and this year’s goal.
  • Comparison of the current Net Profit to last week, last year and this year’s goal.
  • Revenue deficiencies or surpluses, providing an opportunity to make necessary adjustments to get and stay on target.
  • Job cost overruns, providing an opportunity to make necessary adjustments to get and stay on target.
  • Excessive overhead expenses, providing an opportunity to make necessary adjustments to get and stay on target.


One of the biggest problems that businesses struggle with is the lack of time to get everything done, this is especially true for small to medium size companies. Financial reports are one of those things that get put off because they aren’t “directly connected” to generating revenue.

 


This simple report can easily provide the “profit pulse of your company” weekly.

 


We are working on developing this Profit Comparison Report complete with instructions into a product available for use by others. If you or someone you know would be interested in this, please let us know in the comments below.

 

The 4 W’s of Budgeting

by

The Place to Start When Considering a Budget

 

Recently I have been asked multiple times about how I do my business budgeting. This question has come up multiple times over the last several years. Based on the number of times, it must need some discussion.

Budgeting has rarely been a very popular subject. Most people view it as restrictive, confusing or just too much work. It’s even more complicated when you’re self-employed and don’t have a constant or regular income. Before you can budget effectively you need to answer some questions.

The first question to answer is WHY do you want to bother with a budget? This could be because it’s just one of the things that the business world talks about, so it must be the right thing to do. It could be because you are tired of not knowing where your money is going. It might be that you feel out of control. Whatever the reason, this needs to be the first question to answer, because it will affect how you answer the remaining questions.

The next question is WHAT difference is a budget going to make? Before budgeting I would deposit a check and Debby would pay bills. Later I would be surprised when there was less in the account than I expected. After writing the numbers down and doing the math I could see exactly where the money had gone. Before it was written down it would be abstract and estimated. It was amazing how much difference it made seeing it written down. If your happy with your current money situation and can account for where it all goes, then you don’t need to bother with a budget.

6736189489_451af024b0_oIf you don’t like where you currently are then it’s time to sharpen your pencil and get ready to answer the next questions. WHERE do you want to be? This will be different for everybody, but it needs to be answered. Do you want to have money put back for your retirement? Do you want to be out of debt so that you aren’t feeling the pressure that comes with owing money to someone? Maybe you are just tired of your life being out of control and living paycheck to paycheck. Whatever the answer to this question, once you’ve answered it, you then have a destination. If you don’t have a map how will you ever be able to get there?

Next is WHEN will I get there? Once you have determined why it makes a difference and where you want to go, it’s time to figure out how long it’s going to take. This comes down to doing some simple math. Depending on what your end target is, it may seem overwhelming. The thing to remember is that if you don’t start you sure won’t get there. This is why some way of tracking progress is helpful. It can give the process a sense of reality rather than just being a fantasy. Dave Ramsey refers to Aesop’s Fable, the “Tortoise and the Hare” in his Financial Peace University course. We live in a high speed want it now world. We need to remember that slow and steady wins the race and not be discouraged if in the beginning it looks overwhelming.

After years of working through these issues I have come up with a system that works for me. It is an accumulation of different thoughts, ideas and plans from a variety of different people and places. In a future post I will break down and share HOW I budget and track my finances. So until then, answer the questions above so you will be ready to move forward and get control of your money and your life.