Specialist bookkeepers who develop a niche for a particular industry are becoming increasingly savvy in ways they can add value to their clients while also building their fee income.
Consider the case of a bookkeeper with a specialised knowledge of the building and construction sector. Once the books for the business are done the construction bookkeeper can use them to generate reports and forecasts to help you improve the business client’s profitability and efficiency.
Savvy, successful business owners do not take cash-flow for granted. Generally, the smaller the business, the more focus there is on cash-flow. The reason is that smaller businesses have less resources to fall back on. The business owner needs the money to come in, in order that he has sufficient money available to pay the wages next Thursday and to be able to draw out sufficient funds to enable him to pay his domestic bills.
Lets’ illustrate the case for the bookkeeper ‘specialist’.
Scenario 1: The Building & Construction business
Cash flow is important for all business owners but can be a building and construction business’s nightmare.
The nature of the industry is that there are many suppliers and contractors, not to mention any employees, which can place heavy cash flow pressures on your business. It is one business category where cash flow forecasting is vital, and even better when done on at least a monthly basis.
In essence, cash flow forecasting involves identifying where there are potential dangers of cash shortages in your business. A cash flow statement prepared by a bookkeeper can help a business owner identify and address any unnecessary drains on the business’s cash before they get out of hand
Scenario 2: Small Electrical business with over $1 million turnover
Acme Electrical is a small electrical business that employs 10 electricians and a number of apprentices.
Gross turn over exceeds $1 Million per year; clients that Acme has as customers are small businesses and home owners, mostly invoiced-based.
The major issue facing Acme is actually getting paid on time. The back office and owner of Acme spend many hours on the telephone requesting payment; an unpleasant task when debtors make it difficult to be reached.
The reduced cash flow caused by slow paying debtor’s means that Acme must have a significant overdraft facility with their bank; even with the low interest environment, this is a significant cost to the business.
Acme had two main issues facing growth and profitability: large, outstanding debtors who are difficult to manage and obtain payment within the terms of the invoice and, secondly, an interest rate burden in maintaining an overdraft.
The bookkeeper had become familiar with the collections function having had exposure before to late payers and, indeed, being required to understand some of the nuances of collecting overdue accounts. A debt recovery firm, Prushka, had been used, also with a cost factor attached to it (albeit only on settled outstandings).
Another service provider, IODM has a product recently introduced into the market designed to fully automate the Accounts Receivable reminder process in a scalable workflow. Acme implemented IODM seamlessly integrating with their Xero Bookkeeping system. The system issues letters and SMS requests in a timely workflow.
When Acme first started using IODM their outstanding debtors over 90 days averaged $100K. Within four weeks of implementing the system outstanding debtor days reduced to less than $1K.
Selling the sizzle AND the sausage
You do the reports; the above illustration is about interpreting, executing and delivering cash flow enhancements. That is, use data to generate reports and forecasts to help you improve your customer’s business profitability and efficiency.
Some of the key reports you will want to consider for the construction business include: cash flow forecasting and variance analysis, job costing, taxable payments reporting, inventory management, and, if you have employees, payroll.
Because bookkeepers are among the most trusted business professionals, this puts them in a positive light for offering additional advisory services to clients.
As a professional intimately familiar with a business client’s financials, re-configure the compliance work towards advisory work. This makes sense for both the customer and your bookkeeping practice. Offering business advisory services not only allows you to deepen your relationships with current clients and help retain them, but also can distinguish your practice from other bookkeeping firms.