Tradies – now more than ever it’s time to protect your business!
Recent collapses in the construction industry present a ‘wake up call’ for tradies – even if business is booming right now.
By JIm Vass
Volatility in the sector
The recent big company collapses are concerning because typically, irrespective of what industry this occurs in – there is a domino effect . And, when you’re a micro business or an SME, you run the risk of being one of the last to be paid when the financial position of the larger troubled business is finalised, because the bigger guys, and the ‘urgent’ payments (like those owed to the ATO) are taken care of first.
So, let’s talk about how to protect your business.
Protecting your business
Here are a few questions to consider – they’ll help you to ascertain where your significant risks and exposures are.
- Do you do credit checks on customers?
- How effective is your accounting system in identifying unpaid debts?
- What’s your process for following up and settling unpaid debts?
- How much credit can you realistically extend to suppliers/ customers? Are you operating within those limits?
- What are your payment terms and conditions – is it time to review them?
- Do you impose penalties for late payments? Or offer discounts for early payers?
- Do you secure deposits up-front?
- Do you have insurance to cover big financial losses?
- Have you had your credit terms professionally drafted?
- Do you record debts on PPSR?
- Are you structured in a manner which will protect your assets should a major builder go under?
Are you adequately protected as a creditor?
When you’ve answered all of these questions, take a moment to consider the business contracts and agreements you’re currently working with. It could be time to renew these – and if you do, then get professional legal advice.
Many small businesses skip this step – they find templates via a Google search or copy and paste from other documents they themselves have signed. Frankly, this is a mistake – unless you really know what you’re doing, if push came to shove, your agreements might not stand up in court.
So, as a matter of some urgency, get the back-of-house basics right, and also get professional advice – whether it be legal or accounting. It’s really worth the peace of mind in the long run.
And don’t forget too, that it’s always worth having more than one payment option so your customers have a choice, and you have the advantage of being paid, on the spot..
At ATB Partners, we recommend the use of Xero – for many reasons – but for tradies in particular one of the advantages of Xero is the number of apps that you can add onto the system – for project management, invoice and payment tracking, managing staff leave – the list goes on.
Don't get so busy that you forget to look ahead
It’s important to remember too that while this might be a ‘golden moment’ for all trades, costs are escalating, and supply chains are also disrupted.
What this means is that in amongst the busyness, it’s important to find the time to put strategies and policies in place that will hold you in good stead, not just now, in terms of cash flow and profitability, but for the long term… allowing you to build a business that’s sustainable in steady times and in times of adversity.
Virtual CFO
At ATB Partners, we offer a number of services that might interest you – including virtual CFO – a cost-effective outsourcing service that takes care of your bookkeeping and accounting – via Xero – so you can check in and see in ‘real time’ all of the activity and updates.
We can also help you look at overall modeling in terms of costs and pricing. With escalating costs across the board, a number of our clients are reviewing pricing structures and reshaping their service offerings. If we can help, contact us.
At ATB Partners, we offer a number of services that might interest you – including virtual CFO – a cost-effective outsourcing service that takes care of your bookkeeping and accounting – via Xero – so you can check in and see in ‘real time’ all of the activity and updates.
We can also help you look at overall modeling in terms of costs and pricing. With escalating costs across the board, a number of our clients are reviewing pricing structures and reshaping their service offerings. If we can help, contact us.
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