Financial Indicators for your Business

1. Presented by
Richard Wilbert
and

2. Key Management Indicators that
Can Help You Manage a
Successful Business

3. 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

4. Business Planning

5. 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

6. All Good Businesses Have a Plan
• 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.

7. All Good Businesses Have a Plan

8. All Good Businesses Have a Plan
• 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)

9. All Good Businesses Have a Plan
• Strategic Plan
– Vision Statement
– Mission Statement
– Goals
– Objectives
– Action Plans
– Risk Analysis & Contingency Plan
– Competitive Analysis
– Financials

10. Key Management Indicators

11. 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

12. Key Management Indicators
• 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.

13. Key Management Indicators
• 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

14. Profit and Loss Statement
• 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.

15. Profit and Loss Statement
• 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.

16. Profit and Loss Statement
• 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.

17. 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

18. 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.

19. 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

20. 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

21. 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.

22. 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.

23. 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

24. 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??

25. 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

26. 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

27. 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.

28. 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.

29. Indicators to View Monthly
• 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.

30. Indicators to View Monthly
• Gross Margin
– This is direct cost minus revenue
– Most landscape contractors are running
between 45 % to 55% depending the mix of
work.

31. Indicators to View Monthly
– 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%

32. 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

33. The Intangibles

34. 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.

35. SiteSource Business Coaching
and Consulting
• Richard Wilbert
Email: sitesource@live.com
www.sitesourcebusinesscoaching.com
303-909-0798