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Execute a major project like a boss (& not run out of cash)

This blog is the first in a series tackling the business performance of particular industries, written in conjunction Right Brain Insights (RBI). RBI provides a boutique outsourced CFO service to the SME sector.

Many of our clients have major projects driving their performance & cash flow.

One such client was Moorabbin Cabinets – check out their story.

Major projects are exciting. They are complex beasts that can leave a lasting impression on the world.

While these need immense manpower & know-how, they also suck up vast sums of capital. This makes it critical to set your project up to win.

In this blog we are going to try & address this. We will assume that such a SME has the technical expertise & people to execute such a project.

We are going to focus on 3 areas. Compliance, administration & cash flow.

Compliance

Preach!

Compliance is all about covering yourself. It is not to escape responsibility, but to accept & limit. Some things to think about;

  • Insurance. Is it accurate & up to date? Make sure you actually are covered. Believe it or not, I’ve seen a construction company listed as a cosmetics manufacturer in their insurance.
  • Contracts. Have one & have it signed. My God! Seriously… the amount of times there isn’t one. Nobody to blame but yourself if you don’t have one.
  • Contract review. Again seriously… If it’s a $1M project, spending $1K on legal fees to check it is a worthwhile investment.
  • Supplier insurance. Ask them for it or buck could stop with you. It should not be hard for them to provide.
  • Financials. Keep them up to date. Your bank & insurance may need them. Most of all you won’t be able to spot wins or losses on a project if your numbers are out of whack.

Administration

Hopefully your office does not look like this...



'Administration' – sounds boring, but it's not. It is critical to staying on top of things and maximising dollars in your back pocket.

  • Documentation (falls into cash flow too). Much harder for your customer to argue about payment if you have evidence to show you have done what needed to be done. Take photos, videos, write notes etc...
  • Track performance. Think actual vs. quote. Try to see things going off the rails before they do. Keep problems small & surprises to a minimum. Your bank balance will thank you for it.
  • Batch process. Cut admin time by grouping tasks. Like paying supplier bills, or invoicing work.
  • Remittance advices. Send them to your suppliers. They'll love you for it.
  • Systems. This will help achieve the aforementioned points.
  • Efficient meetings. A whole word of ideas on this point alone... Set an agenda & a time frame. Time is money. Make it count.
  • Chain of command. Clear roles & responsibilities get stuff done.
  • Pay people. Don’t EVER stuff around with payroll. Or compliance obligations (super, annual leave, reimbursements etc…).
  • Purchase orders. Engage suppliers via one with your T&Cs in it. Makes sure they bill you for what you ordered.

Cash Flow

An RBI style cash flow forecast. Names & amounts changed to protect the innocent.



Income is for vanity. Profit is for sanity. Cash is King.

Nothing will kill your SME, or your project, quicker than running out of coins in the purse. To avoid this consider;

  • Invoicing. Do it as soon as you can. Delay between when you can & when you do, is detrimental to cash being in your bank.
  • Terms. Engage your suppliers under the same terms you are engaged. Therefore you pay them when you are paid.
  • Follow up. Before an invoice is due call the accounts team. Confirm the invoice is in the system & OK to pay. Do not wait until it is overdue to follow up.
  • Do the job. Nothing prevents payment like a bad work.
  • Forecast cash flow. At least fortnightly. Gives you two opportunities a month to spot ‘icebergs’ & plot a course around them.
  • Call in favours. Most people are happy to help. Can anyone pay you quicker?
  • Communicate with suppliers. If you are going to pay them late, tell them. It will help build the relationship. Do not make it adversarial.
  • Call your bank. Can they help? If there will be a retention, maybe a bank guarantee is an option. Importing, maybe trade finance.
  • Stop work. If you are not paid on time, act. You are not a bank. Do not underestimate the strain of financing your customer’s business.

If you would like to explore how RBI can help give you the clarity to grow your business via major projects, contact David Maher to book in a free chat today.


David Mayer, Director, Right Brain Insights

An analyst by nature & an Economist by training. David possesses a unique ability to see the world & the numbers that drive it.

David has held CFO positions within legal, advertising, construction, manufacturing, & technology companies. He holds a board position with RMIT University (School of Economics, Finance & Marketing). David is an award-winning lecturer & presenter.

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