key management indicators

Presented byRichard Wilbert

and

Key Management Indicators that Can Help You Manage a

Successful Business

Goals of the Webinar

• Discuss the Planning Process for your business

• Discuss the Financial Reports you should be using

• Drill down in the reports, what to look for in the reports

• How this keeps you on track

Business Planning

All Good Businesses Have a Plan

• Business Plan– Cover Sheet– Table of Contents– Executive Summary– The Company– The Market– Technology– Sales and Marketing– Management– Financials


• Business Plan • This is a statement about the business

that follows a distinct format that will be used to evaluate the business for investors, stakeholders, banks and partners.

• The use of the business plan is to demonstrate to outsiders what your business is about.


• Strategic Plan• A document that contains the company’s

mission and vision statements, goals and objectives over a period of time and how specific individuals within the company will achieve these goals and objectives. The Strategic Plan is used to determine the use of limited resources (time, money, people and technology)


• Strategic Plan– Vision Statement– Mission Statement– Goals– Objectives– Action Plans– Risk Analysis & Contingency Plan– Competitive Analysis– Financials

Key Management Indicators


• Key Management Indicators to help manage your business– Financial reports

Chart of Accounts

Budgets

Profit and Loss Statement

Balance Sheet

Cash flow report

Days of sales outstanding

Job Costing reports

Accounts Receivable and Payables


• Chart of Accounts– A chart of accounts is a created list of the

accounts used by a business to define each class of items for which money is spent or received.


• Chart of Accounts– Used to organize the finances and to

segregate Expenditures, Revenue, Assets, and Liabilities

– List is Alpha-numeric– Arranged in order of Financial Statement– 5 digits representing Division, Department and

type of Account


• A Profit and Loss Statement is sometimes called the Income Statement or the P&L

• This is your Chart of Accounts with actual numbers added to the document.


• The P&L serves as the report card of your company’s performance each month.

• Many software packages will compare the P&L to previous years/months, year to date and offer percentages for easy comparison of numbers.


• The P&L can lead to a number of other financial ratios such as: Return on Investment (ROI), Return on Assets (ROA) and many others that we will not discuss at this time, but be aware that these calculations are important to investors and bankers.

Budget

• The Budget is your financial road map and is used to determine whether you are on track or not.– Annual budgets are spread over 12 months of

the fiscal year– Based on the projected revenues of each

month and business activities of each month– Example: May is most likely busier than

December, your budget should reflect that activity

Budget

• Start by creating a Chart of Accounts:– Most software packages will assist with the

Chart of Accounts, but make it unique to your company.

– PLANET has a sample Chart of Accounts in it’s publications available for you to purchase.

Budget

• Budget layout:– Revenues or Sales– Costs of Goods- Direct labor, Materials, – Gross Margin – Sales minus COGS– Expenses – Rent, Insurance, Office expenses– Net Margin (Profit)- Gross margin minus

Expenses

Budgets

• Create a list of costs that you include in each account item for future reference

• Once annualized, create a monthly spreadsheet based on fiscal year- 12 budgets by month

• This becomes the outline for your Profit and Loss Statement or Income Statement

Balance Sheet

• A Balance Sheet offers a snap shot of your business on a given date and time

• The Balance Sheet reflects 3 categories Assets, Liabilities and Ownership Equity in the business.

• The Balance Sheet is not a tool that you will use to manage your business, but bankers and investors will be interest in this document.

Cash Flow Report

• Cash flow is a summary of when cash will be received in the business.

• Cash flow is used to determine when suppliers and other bills can be paid by the business.

• Cash flow creates a spread sheet of when payments are due and cash is received.

• This allows you to manage your cash in and out of the business.

Days of Sales Outstanding

• Days of Sales Outstanding (DSO)– This term refers to the number of days from

invoice to collection.– The longer the days outstanding the slower

the customers are paying you.– This needs to be monitored by someone in

your office

Job Cost Reports

– Maintenance contractors should review projects on a monthly basis to determine labor issues.

– Materials are not as important on maintenance projects.

– You need to determine how detailed you want to be on your projects, whether it is just man hours or to be broken down by job function: such as Mowing, Pruning, Weeding??

Account Payable and Receivable

• Payables– What you owe the suppliers and vendors for the goods

purchased for a project.– Most vendors and suppliers offer terms of net 30. Thirty days

from date of purchase they expect payment– You need to develop a rolling chart of when you can make your

payment to them, referred to as cash flow report.– Include such things as payroll, taxes, equipment payments– Knowing when and where the funds are coming from to make

these payment is a necessary part of your business

Account Payables and Receivable

• Receivables or Aging– These are the payments from your customers to you-sometimes

referred to as aging.– This will help determine when you can make your payments– Knowing how your customers pay is important to you meeting

your obligations to your suppliers, employees and good ole Uncle Sam.

– Watching this closely is a method of knowing if there may be an issue with a customer.

– Most contractors will invoice net 30 or pay in 30 days– If you allow this number to grow from 30 days it will cost you

money– It is important to get on top of these numbers and collect the

money owned your company

Key Financial Indicators

• These Financial Indicators are important to managing your business and can provide a quick look at your business and tell you about your company’s performance.

Indicators to View Monthly

• Direct Labor– Labor is your largest expense in most cases– Create benchmarks from past years to

compare your labor percentage to your current statement

– Watch the percentage as it moves up or down, it is a good indicator of the health of your business and whether you are making a profit.


• Material Expense– Materials are an expense in the Design Build

and Bid Build world that can create large swings in your P&L

– Look at this percentage number on the yearly average, compare to your monthly statement

– This number can indicate whether you missed something in monthly invoices, or over expensed a budget item on a project or mis- coded an account for an item.


• Gross Margin– This is direct cost minus revenue– Most landscape contractors are running

between 45 % to 55% depending the mix of work.


– Operating Profit• Funds remaining after all expenses are paid• This can range from 0% to as much as 10% or

more for good companies• The average Landscape company is between 3%

and 5%

Annual Review

• Production per hour: Revenue/Labor Hours

• Average job size: Revenue/ Number of projects per year

• Non productive Labor Hours annually

• Annual fuel budget

The Intangibles

The Intangibles

• In every business there are indicators that can not be measured numerically

• Customer Satisfaction: are your customers happy with the service?

• Employee Satisfaction: Are your employees happy and enjoying the work experience.

• Owner Satisfaction: Are you happy and enjoying the ownership experience.

SiteSource Business Coachingand Consulting• Richard Wilbert

Email: [email protected]

www.sitesourcebusinesscoaching.com

303-909-0798

mailto:[email protected]

http://www.sitesourcebusinesscoaching.com/

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