According to Merriam-Webster, “seat-of-the-pants” applies to something, “done or made by using your own judgment and feelings without planning, preparation, or help from others.” This is not the way to run a contracting business.
Alas, seat-of-the-pants is exactly the way many contractors run their companies. It does not have to be this way. Simply using a General Manager’s Daily Report will give an owner or manager day-to-day control over the operation.
4 Reasons Why You Need a Daily Report
If you have been doing well so far without a daily report, your business will take off with one. Here’s why…
1. Manage by the Numbers – When a contractor manages by the seat of his pants, he makes decisions based on what he thinks is happening. As the saying goes, “what you know, ain’t always so.” When someone manages by the numbers, he is managing based on reality. Service Nation Alliance Business Coach, John La Plant advises contractors to listen to the numbers because the numbers speak to you. A daily report gives them a voice.
2. Make Sure There is Money at the End of the Month – Too many contractors end up with too much month left at the end of their money. The cash management function of a good daily report helps the business owner or manager ensure there is money left at the end of the month.
3. Operate with Eyes Open – A daily report keeps the business leader focused on upcoming financial events and the means to cover the business’ obligations. There are no surprises.
4. Reduce Anxiety – Uncertainty is the greatest source of anxiety for a business leader. It runs from the smallest company to the largest and explains why the stock market performs better in a stable environment. A daily report reduces the anxiety a business leader faces, which facilitate bolder decisions.
A daily report reduces the anxiety a business leader faces, which facilitate bolder decisions.
5 Key Elements of a Daily Report
The Service Nation Alliance uses a Daily Report based on a design by contracting genius, Ron Smith. Ron’s daily report has the following eight elements:
1. Working Days – It lists the total number of days available for work in the month, the number used to date, and the number of available days remaining in the month.
2. Cash – It identifies current cash amounts by location. For example, cash can usually be found in a company’s checking account and possibly, in an interest-bearing money market account for reserves.
By the way, it is always a good practice to sweep excess cash from the operations account into the money market for two reasons. First, excess cash can hide problems. Second, it is better to benefit from some interest than no interest.
3. Accounts Receivable – Hopefully, any residential service company will operate on a collect-on-delivery basis where cash, checks, and credit cards are accepted when service is complete. Nevertheless, when replacements are financed there can be a few days delay before funds are received. If a contractor insists on light commercial, he might find himself with receivables. A receivable is a contractor’s money in someone else’s pocket. A daily report identifies receivables and presents an aging schedule. This should be front and center every day because receivables represent a source of funds and aging receivables are less likely to be collected.
4. Accounts Payable – A daily report should identify every significant payable and amount over the remainder of the month. How much is due, to whom, and when? These are the landmines the company faces for the month. Is there cash on hand to handle them? If not, will there be? If the cash will not be available, the manager knows he needs to take action.
5. Monthly Sales – A daily report lists the replacement sales, service sales, other sales, and total sales budgets for the month. Sales to date for the month, in each category should also be listed. A sales pace is arrived at by dividing the sales to date by the working days used and multiplying the result by the total working days for the month. This quickly lets the manager know if the month is coming in according to budget or not.
Using a Daily Report
Assembling a daily report should not be laborious. It should be done quickly, at the close of each day, in advance of the next day. Preparation of the daily report should be assigned to the first office person hired. By making it a routine part of an office worker’s job, it is more likely to get done.
The daily report should be waiting for the business leader every morning. It should be the first thing he reviews, before checking email and before checking messages.
No contracting business was ever forced to close when there was money in the bank. A daily report helps managers avoid running out of cash.
To learn about the Service Nation Alliance or to attend a complementary, one-day Success Day seminar, call 877-262-3341 and ask for a Business Advisor.