Cashflow challenges for tradesmen & construction sector businesses
Monday, August 5th, 2019 in: Advice
The construction industry
There are two main types within this, general builders and tradesmen and then there are more profession type workers such as surveyors and architects, IE the ones that don’t tend to get their boots as dirty! We have experience dealing with both types, although in our experience the needs are a little different.
The typical builder and tradesmen wants to be able to focus on the day to day activities of the business without having to worry about all of the paper work and admin that comes with it. We have found that you’ve left your ‘day job’ in the past and kind of learned as you go along with the business side, hey no one is judging as most small business owners tend to operate this way at first (including myself).
Taking on sub-contractors
However, once you become busy with the initial work that comes in, it’s not long before you need to look at sub-contractors. This is where it gets real! You take on the ‘subbies’ and it is amazing at the start as you can take on bigger jobs, yay more money…
More money = more problems (as Jay Z says)
Any one in this industry knows how challenging it can be dealing with sub-contractors in general plus the money side of the CIS, VAT, materials, cashflow and tax. When you get the nice big lump sum from a customer it may feel like you have finally won the lottery but the fact is, most of that money is not yours. The sooner you start getting into that mindset, then the sooner you can start focusing on the money that is yours, the profit. It feels like in most cases the profit comes at the very end of a big job or project, once you’ve paid all the subbies along the way, paid off the supplier accounts and figured out what the VAT bill is, you can finally pay yourself. The issue is that what’s left at the very end can often be very little if anything! I’m sure that there’s many business owners that have pushed through this, charge a great price for the work based on years of reputation but for many in the trade and construction industry they are still trying to get there.
In the next couple of weeks we will share 3 things you can do that will have a massive impact on your cashflow as well as your profit…
Ditch the ‘old school’ accountant…
Many accountants are what are known as ‘general practitioners’. This means that you offer many different things to many different people. In practice this tends to actually be limited to a number of key services that most small business owners require. I don’t use the word require lightly as this generally means compliance based work, IE if you don’t file your accounts or tax return on time then you will be in trouble with HMRC!
The services offered by any good firm of modern minded accountants has grown over the last few years, taking advantage of tech and also becoming more of an advisor to the business owner. We offer cashflow and forecasting services as well as regular up to date monthly management accounts so you know what your VAT is month to month and even your tax bill.
Despite this change there is still room for the good old core services, IE your accounts, self-assessment tax return, bookkeeping, VAT, CIS, payroll etc. We look after everything for many clients, pretty much acting as your finance function without the need to hire a staff member.