Master Your Financials for Maximum Profits: The Guide for Construction Trade Contractors

Construction trade contractors face a wide range of challenges in their day-to-day operations. From managing budgets to hiring skilled workers, it can be challenging to stay on top of all the tasks required to keep a business running smoothly. One of the biggest challenges that contractors face is understanding their financials and how to use them to make informed decisions.?

I teach my clients to create consistent cash flow and improve profitability by understanding and leveraging the following reports:?

1. Profit & Loss Statement: Use the % of Sales Report Method to better identify your revenue and expense drivers as you scale.?Your Gross Profit Margin on an internal report can be misleading if it doesn't match up to your actual P&L.
2. Balance Sheet: This can show you where money gets “stuck” in your business, and also helps forecast working capital needs. Measure your A/R and Inventory Turnover Ratio as well as the Current Ratio every month. These ratios are the keys to your cash flow and financial health.
3. Budget/Profit Plan: You can easily build a 2023 budget by using your historical numbers from your budgeting software, without building spreadsheets from scratch or crunching numbers.? This report will add two additional columns to your monthly P&L; “Budget” and “Variance to Budget” which will help you better identify areas of concern/opportunity, and make timely adjustments based on market conditions.?

Financial statements are a valuable tool for any business, but for construction trade contractors, they can be particularly tricky. Contractors must be able to read and use financial statements to determine their performance, identify trends, and plan for the future. Without a firm grasp of their financial health, contractors risk making costly mistakes and potentially losing money.?

Another financial challenge for contractors is managing their budgets. Many contractors are working on projects with tight deadlines and limited budgets. To ensure that their projects remain profitable, contractors must be able to control their costs and understand the financial implications of their decisions. This requires a deep understanding of their financials, including where they are spending money, what they are spending it on, and where they can find savings.?

Finally, contractors must be able to assess their risks and plan for the future. By monitoring their financial statements and tracking their performance, contractors can identify areas of risk and plan ahead to ensure their success.?

Profitably Yours,

Patrick

I run a monthly workshop and freely share the tips and proven strategies that I use with my paying clients. If you are interested in more information, you can check out my upcoming workshop on February 22nd at 11 am EST.?