7 Ways to Boost Cash Flow & Maximise Profits

Welcome…• Relax & Enjoy • Eat, drink & connect• Outcomes - Q & A• Be Open – take notes, ask how? • Participate – share…• Respect – phones • Link to slides –

slideshare.net/tradeinsights• Bryn & Jon

Who is PROTRADE United?We believe in a united effort and collective knowledge to help you find an even better way to run your business…

Trade specific solutions in…• Strategy – income, cash flow, profit, team

development• Accounting – financially well organised, minimise

tax, • Marketing – online & offline• System Integration – streamline IP into the cloud

& protected

Why PROTRADE United?Ultimately for 3 reasons…

1. To give you the luxury of an unhurried life

2. To raise the standards of trades and related service businesses around Australia

3. Decrease the anxiety and depression related deaths amongst trades

Some of our clients…

Top 7 Key Frustrations for Many Trade Businesses…1. Working too hard for little/no remuneration2. Working under too much stress/pressure3. Too much time in the business – missing out

on family and lifestyle4. Staff issues5. Inconsistent work/jobs6. Chronic cash flow7. Constantly chasing their tail – no let up!

Over the lifetime of a business…• Only 39% are profitable• 30% break even• 31% lose money

Challenges…

To think about…• If you don’t understand your numbers you

don’t understand your business.• Understanding vs. Doing• Mange your money wisely and you will have

more money to manage.• 80/20 – Emotion vs. Mechanics

Income vs. Profit vs. Cash Flow vs. Equity

The Oh C&%# moment!

What are the consequences?• Stress – Loss of Sleep,

Relationships• Reputation/Integrity• Staff leave• Credit rating• Insolvency/Closure• Bankruptcy

1. Understand the causes?• Poor Awareness/Money Management • NO measurement/understanding• NO cash flow projection• Unaware of break even

• No cash reserves• Undisciplined spending/SMTHYE!

1. Understand the causes?• Declining sales• Declining profit margins• Not charging enough• Too much WIP (Work In Progress)• Poor efficiencies/inefficient team• Lack of KPIs• Poor Productivity/Focus

1. Understand the causes?• Delays in getting money in• Delayed invoicing• Poor payment terms• Bad choice of clients•Paying suppliers too quickly•Overheads too high•Excessive interest

• Poor business model

Example –Pre AwarenessDay 1 - Get the job Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account) Day 11 - Complete the job & pay the team Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days Day 44 - Receive payment from client

This equates to possibly 37 days negative cash flow

What is NOT the magic solution?

More income is NOT the magic solution – sometimes just the same challenges with more zeros!

What has been valuable?

2. Where to start…• Belief System (B.S.)• Focus• Philosophy• Psychology• Money flow and allocations

2. Where to start…• Get super profitable• Increase the speed at which money

come in• Delay money going out• Flow it by priority

3. Managing the flow…

Where to start…Track, Measure, Manage, • Cash flow/sales forecast – money in, out,

cash status, • Worst Case Scenario (WCS)• Software • Understand the cash cycle in your business

4. Increase Profits• Get more clients/customers• Increase average job value• Increase prices/charge out• Add MASSIVE value

4. Increase ProfitsImprove efficiencies/productivity• Job Management Software (Aroflo, Geo Op, etc.)• Track budget hours to actual – use of time• Use sub contractors – if legal• Role of team – Get or Keep• Implement KPI’s• Offshore non productive tasks

4. Increase ProfitsSelect Better Clients/Customers• Sack the slow payers – they are not worth the

headaches• Check credentials with new clients before

accepting credit terms• Register on PPSR

5. Get Money in Faster• Firm up payment/trade terms with customer• Deposit - use mobile payments/EFT• Progress payments • Invoice/Payment on completion - Mobile

payment/EFT • Make it easy for clients to pay• Incentivise to pay early/on time• Sell off old inventory• ASK if necessary

Invoicing System• Job Management Software (Aroflo, Geo Op, etc.)• Immediately on job completion – KPI’s• Follow up – automate, where possible, • Track slow payers• Have a debt collector on hand and use them –

follow through with our word

5. Get Money in Faster

Automate…

• Take full advantage of terms – don’t pay too soon• Negotiate payment terms with suppliers• Communicate always – if there is going to be a delay• Review expenses quarterly

Insurance Electricity/Phone Salary/HR – Get or Keep

6. Delay Money Going Out

7. Prepare for shortfalls• Not if, when• Apply for overdraft/credit in advance• Credit card

Example –Pre AwarenessDay 1 - Get the job Day 7 - Start the job & buy materials (50% Cash, 50% on 7 day account) Day 11 - Complete the job & pay the team Day 14 - Pay for materials (50%), Invoice the client – pay on 30 days Day 44 - Receive payment from client

This equates to possibly 37 days negative cash flow

Example –Post AwarenessDay 1 - Get the job and receive 10 % deposit

Day 7 - Start the job - Buy materials (50% COD, 50% on 7 day account) using deposit from client and request progress payment on materials arrivingDay 11 - Complete the job, Invoice client - (receive payment on completion or 7 days), Pay the teamDay 14 - Pay for balance of materials (50%) – out of client payment(Day 18) Worst Case - Receive payment from client This equates to a +ve cash flow or just 7 days negative cash flow (for only 50%)

Get a great team around you• Book keeper• Accountant• Coach• Mentor• Peer Group• Never stop learning

What has been valuable?

Pricing• Brand• Managing Expectations• Education• Mark up vs. Margin

Discounting Cost Of Goods Mark Up Sale Price GP Real' Income

$1,000 100% $2,000 50% $1,000

Discount Amount New priceNew Real Income Extra sales required

5% $100 $1,900 $900 11%10% $200 $1,800 $800 25%15% $300 $1,700 $700 43%20% $400 $1,600 $600 67%25% $500 $1,500 $500 100%

Price Increase Cost Of Goods Mark Up Sale Price GP Real' Income

$1,000 100% $2,000 50% $1,000

Increase Amount New priceNew Real Income Extra sales required

5% $100 $2,100 $1,100 -9%

10% $200 $2,200 $1,200 -17%

15% $300 $2,300 $1,300 -23%

20% $400 $2,400 $1,400 -29%

25% $500 $2,500 $1,500 -33%

What ACTION will you take?

It’s interesting you know…Most of business owners will…• Hear what we say,• Understand it

intellectually,• Agree with all the

principles,• Get excited about what’s

possible• KNOW that it is the thing

they should do, yet…

Do nothing!What gets in the way…

LIFE!

Which leads to?

Your opportunity to get clearComplimentary Strategy Session• Where you are• Where you want to

be • The Game Plan to

get your there…

Participant or Spectator…?