Background
A small but busy construction company approached us with significant cash flow challenges. Despite a steady stream of work, they consistently struggled to maintain financial stability. The directors were unsure why they were constantly short of cash and unable to plan ahead.
Assessment Phase
We began with a detailed assessment phase, which included:
- Financial Analysis
A deep dive into their accounts quickly revealed that their financial data was extremely disorganised and inaccurate. Standard profit and loss reports were unreliable, making it impossible to understand the true financial position of the business. - Data Sampling and Reconstruction
We selected a representative sample of data from several recent months. Using this sample, we painstakingly rebuilt a reliable profit and loss statement to get a clear picture of the company’s real income and expenditure. - Timesheet Management System Implementation
We identified that the company had no formal method for tracking time spent on jobs, quoting, or administrative tasks. We implemented a timesheet management system at no additional cost to them. This allowed the team to track billable and non-billable hours accurately for the first time.
Key Findings
Through this process, we identified the root cause of their cash flow problems:
- The business was consistently making a loss.
- Quotes were being based purely on the cost of materials, with no proper allowance for labour time.
- Significant time was being spent on quoting, project management, and admin tasks that were not being charged to customers.
This lack of awareness about true job costs had been causing losses on almost every project.
Outcome of the Assessment
The assessment phase was a massive eye-opener for the company. They finally understood that:
- They were underquoting on nearly every job.
- They were undervaluing the time and skills they brought to each project.
- Their pricing structure needed urgent revision to include labour and overheads.
Next Steps: Implementation Phase
We are now moving into the implementation phase, which includes:
- Weekly Financial Monitoring
Due to the unreliability of their existing accounts, we will monitor financials on a weekly basis, using real-time data from the timesheet system and new job costing methods. - Sales and Marketing Support
We are working closely with the directors to develop strategies to increase pricing without losing clients, by communicating their value more clearly and positioning themselves correctly in the market. - Continuous Improvement
Regular review meetings and support will ensure they stay on track, learn to spot issues early, and make proactive business decisions.
Conclusion
This project has already had a profound impact on the business owners’ understanding of their financials. By uncovering the real causes of their cash flow issues, we have laid the foundation for a stronger, more profitable future.
We are looking forward to supporting them through this exciting next stage of their business journey.