This past April’s CEDIA Management Conference included breakout sessions focusing on 10 different business topics: cash flow management, organizational structure, labor efficiency, closing out the job, project management tools, customer service, sales compensation, education/training/employee development, sales process, and lead generation/outreach. Our first CEDIA Management Conference Reminder focuses on cash flow management. Here are a collection of key ideas discussed by your peers and session moderator Leslie Shiner for you to consider to help you improve your business:
–Go to the bank and get a working capital line of credit to better finance growth.
–Establish your line of credit before you actually need it.
–Don’t pay operations costs with your line of credit. Use cashflow for these overhead expenses.
–Choose either fixed-price or time-and-materials billing contracts. Fixed price billing provides more money up front, but must be tracked “religiously.” Fixed-price contracts are designed collect income at milestones based on prescribed calendar dates or completed project phases.
–Aggressively manage accounts receivable to reduce exposure. A written contract and payment details are a must. Get the customer to sign on the line.
–Structure your payment draws throughout a contract so that you are not playing bank. Have the client prepay for any equipment (and some services as well, like design retainers).
–Billing phases can consist of design, prewire, trim, labor, and final. They may instead consist of discovery, design, and execution.
–Set up separate draw schedules for equipment and labor.
–Structure contracts so that your client pays for equipment 60 days prior to final installation. This gives you 30 days to receive, and 30 days to stage the system and test.
–Get “cash ahead” on your books by borrowing from the bank to pay a vendor early.
–Have your client sign a “substantial completion” document when a project is substantially complete based on the original scope of the contract (don’t include change orders).
–Try to avoid financing new jobs with “other peoples money” from on-going projects, because it will take four times as long to pay it back with net profit.
–Keep an account of projects that are in your “pipeline.” When cashflow is lagging, consider discounting a pipeline project to get new money into your cashflow.
–When running a collections department, remain persistent, methodical, and repetitive.
–Hold weekly meetings with your QuickBooks expert and collections person to stay on top of your cashflow.
Next month, RS
will address the Management Conference topic, Organizational Structure.