There have been insolvency situations in construction recently. Some have ended up in administration. Do you know why this is happening and how you can prevent this from happening in your business? Here are some issues we find in the trade business that can lead to insolvency.
Why a trade business might not perform
Job costing allows you to know your business margins and doing this incorrectly can be detrimental to your trade business. Track your labour and materials on an individual job level and consider your overhead allocations. If your margins are below an estimate percentage, take action and improve your margin.
Track your job costing successfully and report it correctly. Your supervisor should see the estimate margin and the current margin. If you monitor performance, you can improve profitability. Check the financial health of your trade business.
As your company grows, you might need to use leverage to fund it. You need to manage this correctly or commitments might become onerous. High inflationary environment and rising interest rates can be a challenge with debt. Consider increasing repayments when making financial decisions.
Use your systems effectively and keep up with the progress of your projects. You can use job management systems like Nexvia especially if you’re in the construction industry where several projects are handled at the same time. If you use systems ineffectively, you won’t know the true costs of invoices, labour, inventory and how long a job takes. This would lead to inconsistencies.
The shortage in trade services have increased prices and made it hard for trades and builders to finish jobs. The pressure in the material costs and supply does not look like it’s going to get better and the increasing number of builders need to adjust contracts. Handle your contract properly and be prepared before starting a job.
As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.
You can click here to speak to a business, accounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.
We would love to help you formulate investment strategies and streamline your processes to take your business to the next level. Our goal is to help you grow your business, find ways to invest more and increase your productivity.
Phone: 1300 328 855
Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Sky Accountants Gisborne & Macedon Ranges
Phone: 03 97444522
Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437