Call us today 08 7129 4433

Contact
Check out our Financial Foreman Academy
Learn more

Call us today 08 7129 4433

""/
Plumbers, The Financial Foreman Insights

Know your numbers, what your plumbing business should be making!

 

The Financial Foreman Insights – Plumbing Part 4

The Final instalment in the series, if you would like a summarised guide click here and subscribe to receive more helpful hints. We will focus on the key numbers form all plumbers operating in the plumbing industry, giving you a true indication of how you stack up.


 

Profit – 12%

For every $100 in sales, the business should have $12 the bank left over. Is this your profit margin? If not let’s see why it’s different.

Wages – 28%

For every $100 in sales, $28 should be going to Wages. Be sure to include owner wages or what you should be playing yourself in this figure.

Purchases – 37%

For every $100 in sales, $37 should be going to Materials.

 

“Sole Proprietors drawing an income from profit can inflate industry profit margins and wage costs”

Other – 20%

Other is made up of all other expenses that make up the costs of running the business. I.e. Subcontractors (10%), Motor Vehicle Expenses (5%), Insurance, Repairs and Maintenance, professional fees etc.
For every $100 in sales, $20 should be going to Operating Costs.

Depreciation – 2%

Decline in value of equipment.
For every $100 in sales, $2 should be from the depreciation of equipment (non-cash item).

Rent – 1%

Most small contractors don’t rent out an office or warehouse space, so if you don’t you should see this amount left over in the bank.
For every $100 in sales, $1 should be going to rent.


 

What to do next

These benchmarked ratio’s give a good indication for improvement areas for your business. If Wages are too high, are your staff spending more time travelling to pick up supplies too frequently? If Materials are too high, have you got your Materials to mark up right? Or you might have issues with wastage of Materials. As accountants we love numbers, so if you have a question or something doesn’t quite add up feel free to get in touch and we can help get to the bottom of it.

Download your free cheatsheet to improving your plumbing business.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.


 

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

 

 


""/
Plumbers, The Financial Foreman Insights

Changes to immediately turn around your plumbing business

 

The Financial Foreman Insights – Plumbing Part 3

Previously we focus on the future growth prospects of the plumbing industry, now let’s focus on the current opportunities that you can take advantage of. Call it the easy wins, it will generate returns faster for your business.

 


Licencing

Further training to upgrade or acquire new plumbing licences permits the business to operate in a larger variety of segments. Such as resource infrastructure, equipment and solar technology opening up new opportunities and revenue streams for your business.

Gas Fitting

Specialise in gas fitting, this segment of the plumbing industry has been growing over the last 5 years increasing its revenue share in the plumbing industry. The growth in the share of the population with access to natural gas as a source energy is driving this demand and will continue to grow. In comparison to general plumbing services, gas fitting services offer a high sales per job ratio.

 

Roof Plumbing and Drainage

An increase in domestic water tank installations and wider use of steel roofing on single-unit houses and multi-unit apartments has seen a rise in roof plumbing and drainage services. A particular focus on those that are environmentally conscious can reap rewards.

 

“Growing markets create opportunities and new revenue streams for your business”

Skilled Labour

It’s no secret that finding good skilled labour is a difficult task a problem that is not unique to the plumbing industry but seen right through the construction industry. There are a few ways you can use this to your advantage:-

  • Build a good relationship with training providers and apprenticeship organisations. This should give you access to staff with a good mindset and the right attitude before they become available in the employment market.
  • Build a relationship with schools to have work experience students through your business, this again is a great way to great future staff with a good mindset and the right attitude.

This way you are able to mould your staff to your business way of doing business, with its values and representative of your brand.


 

What to do next

Larger contracting firms are currently offering a broad range of services, a one-stop shop if you will. Contrastingly smaller contractors are increasingly specialising into specific service categories (hot water service, gas, solar heating etc.) allowing them to capture contracts across a larger geographic area. Think about your experience in the industry and particularly what your business does well that is where the greatest opportunity will be.

Download your free cheatsheet to improving your plumbing business.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.


 

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

 

 


""/
Plumbers, The Financial Foreman Insights

The future of the plumbing industry, where do you need to be?

 

The Financial Foreman Insights – Plumbing Part 2

The plumbing industry is changing, a change in the types of dwellings we are constructing. This has a flow-on effect to the number of plumbing amenities per dwelling unit and exposed roof areas. So as we look to the future, what is the industry moving towards?

 


Switching household demand

Some plumbers have adapted to a changing household demand and found a successful niche by offering specialist installation service to facility households switching from traditional gas or electric hot water systems to more environmentally friendly solar hot water systems. A demand that is expected to grow in the near future.

New residential building and renovation work

The recent increasing demand for plumbing work for the installation of fixtures and fitting in new buildings and renovation work on the existing buildings is expected to continue. The rise in household discretionary income will support this demand.

Plumbing emergency and maintenance work

The demand for plumbing emergency repair and maintenance work in the housing market will remain solid, supported by trends in household discretionary income and consumer spending. Smaller plumbing contractors will continue to derive the bulk of their revenue from this work, however, an increasing share of this market will be met by contractors operating through franchise arrangements or innovative schemes, such as Emergency Home Assist (EHA) and programs offering by insurance organisations.

 

“The growth in Emergency Home Assist (EHA) and programs offering by insurance organisations shouldn’t be ignored”

 

Non-residential building construction (commercial) work

Strong demand is forecast for plumbing installation work on new office, retail and warehouse construction projects. Demand is expected to strengthen for work in the institutional building market (educational facilities and hospitals).

Infrastructure work

Moderate improvement in demand for infrastructure markets over the next few years. Reflecting the recovery of investment in water supply, sewerage and pipeline developments to cope with the expanding population base and improve water security.


 

What to do next

One eye should be kept in the future growth of the plumbing industry and expected revenue streams. The strategic decisions on the future direction of your business should be based on this data and give you an advantage over your competition.

Download your free cheatsheet to improving your plumbing business.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.


 

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

 

 


""/
Plumbers, The Financial Foreman Insights

5 Key Success Factors for your plumbing business

 

The Financial Foreman Insights – Plumbing Part 1

Do you want to improve and grow your plumbing business? The first step is to look at your successful competitors and see what they are doing. Powered by Research and our knowledge, insights and experience we know the most successful plumbing business do the following very well:-

 


Market your business plumbing business effectively

What does that mean?

  • You have a steady stream of referrals from existing and past customers
  • You consistently receive leads through a local business directory
  • You have the phone ringing from an ad in the local paper
  • You have enquires from a mail out campaign
  • You have an online presence and a combination of paid advertising and social media activity results in new leads
  • You sponsor a local club (ie footy club) and receive a return on that investment- You develop and maintain a good relationship with equipment suppliers and project developers

 

The key word is you market your business ‘effectively,’ you should be tracking where your leads are coming from (ie referrals, ad in the paper etc.) and the relative marketing spends. That way you are able to measure what gives you your best bang for your buck and invest more accordingly. It is worth noting marketing is not a one size fits all approach, the demographic profile of your customers varies from business to business and the method to market to the customers should be varied accordingly.

“The key word is you market your business ‘effectively,’ you should be tracking where your leads are coming from”

 

Ability to compete with other plumbing businesses

How do you give yourself a leg up on your competition:-

    • Your relationship with plumbing suppliers and more specifically the price your supplies
    • Ability to offer your services in packaged deals, customers like fixed prices.
    • Specialising in a segment of the industry (list segments), excel in one segment quote jobs accurately and do the work more efficiently by focusing on one segment.
    • Broaden your skills and be a specialist in a variety of segments.

 

Ability to change with the market in the industry

How do you give yourself a leg up on your competition:-

The successful plumbing business are able to adapt to the needs of the consumers. For instance:-

      • Market demand for Hot Water Systems spike in winter, the successful plumbing businesses know this and market promotions around these seasonal fluctuations
      • Differentiation of the services, adapting the business to suits the needs of their consumers. IE. Adding gas fitters to service the increased demand for gas installations.

 

“The successful plumbing business are able to adapt to the needs of the consumers”

 

Ability to quickly adopt new technologies

Although the industry has been slow (relatively to other industries) in implementing new technology. The same can be said for construction as a whole, the successful plumbing business is quick to innovate adopt new technology that makes services more efficient and streamline workflows.

 

Having a good reputation

Successful plumbing business can bank on having a good reputation and reap the benefit of that.

  • Those businesses have a recognised band. Customers, Staff and Suppliers know that brand and the values associated with it (quality, professionalism or reliability as examples)
  • Those businesses also collaborate with like-minded trades (carpenters, builders, painters).

 


 

What to do next

That is a lot of information to process but it’s important to not be overwhelmed or try to bite off more than you can chew. Write out a list of 10 ideas from this insight, put the list somewhere you will look at it every day and just implement one new idea a month if your an ace you can go harder later but start off slow and tick the idea off after each month.

Download your free cheatsheet to improving your plumbing business.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.


 

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

 

 


""/
Superannuation

Superannuation – 3 Helpful Facts for Your Retirement Fund

How much should I be contributing?

Superannuation, money saved away during your working life to fund your retirement. Sure it can be hard to care about superannuation as a business owner when you’re at least 30-40 years away from accessing it but what if the ATO helped you save for your retirement? Many business owners do not consider the great tax incentives superannuation can offer.


3 Little-known Facts

Now I have covered the importance of super let’s dive into 3 little-known facts about super relevant to you!

It might sound simple enough but do you know your superannuation obligations as an employer? Generally, if you pay an employee more than $450 (before tax) in a calendar month you have to pay super on top of their wages (ordinary earnings). The current superannuation rate is 9.5% and it must be paid quarterly into the employee superannuation fund by the 28th of the following month. A recent change also requires that you pay and report super electronically in a standard format (Superstream compliant).

“It might sound simple enough but do you know your superannuation obligations as an employer?”

A couple items to note about your obligations, Ordinary earnings can exclude payment for overtime, allowances, bonuses, etc – a full list can be found here.

Just because a worker might be considered a contractor (on an ABN) you can still be liable for superannuation particularly in the contract is wholly or principally for that person’s labour.

Have you ever paid your employees superannuation late? That super you have paid isn’t tax deductible and a superannuation guarantee charge statement must be prepared (interest and administrative charges apply too). A disastrous result for something that can be easily overlooked. Best practice is to prepare the payment on the 20th are quarters end to allow enough time for the contributions to hit the employees fund by the 28th cut-off.

“Have you ever paid your employees superannuation late?”

Lastly, concessional contributions have a cap each year, currently $25,000. This means employer contributions, salary sacrifice and personal contributions (you wish to claim a deduction for) are taxed at 15% up to the $25,000 cap. If you go over your cap you will be taxed at your marginal income tax rate. Contributions towards the cap are added up when that are received in your super fund, not the period the super relates to. Let me give you an example, the June 2018 Super is due of the 28th of July 2018. Let’s say you want to salary sacrifice another $5,000 for the June quarter to be included in your 2018 Financial Year cap. The $5,000 will actually be paid on the 28th of July and count towards your 2019 Financial Year cap. This has caught out a few business owners I know; thus, if in doubt speak to your superannuation fund and/or your accountant.


What to do next

Superannuation sounds easy enough but there are a few pitfalls that catch many business owners off guard. If you can avoid these pitfalls, superannuation can be used as an effective method to boost your funds for retirement and save on tax. Who wouldn’t like to pay less money to the ATO and keep more money in their pocket (when you retire)?

If you have any queries about your retirement fund or simply want to know what you can do in order to ensure you’re making the most of your superannuation do not hesitate to contact our team at Accodex.


Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your trusted Accodex Accountant for help.


Written By: Joshua Gloede

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

Extremely dedicated to making sure his clients understand the significance of budgeting and planning, Josh has often emphasized the importance of understanding and respecting your cash flow, – or as he likes to refer it – the lifeblood of your business.


""/
Cash flow

Cashflow, a problem of when not if…

Recapping the cashflow situation

Did you know that in December only 56% of Australian small businesses were cashflow positive?1 If you aren’t actively managing your cashflow you will be having problems in the future. That’s the realisation I made after my cashflow workshop with Master Builders Association of South Australia. When business is good your bank account is healthy, suppliers and employees are happy and life is good. When it’s bad you having nothing in your bank account, employees and subbies are pissed, suppliers are calling and you’re too stressed to sleep. It’s alarming how quickly it can all unravel.

 

Once you are in the middle of a cashflow crisis, it’s too late…

 

How quickly it can all slip up…

Construction accounts for 8% of Australia’s GDP,2 yet this sector alone accounts for 21% of Australia’s insolvencies.3 Given that on average, it typically takes 45-60 days to get paid, is it really any surprise? Chances are your clients are going through cashflow issues themselves and if you’re not careful you will be caught up in the vicious circle. Your clients pay you late, you pay your suppliers late and it goes on and on all of a sudden the healthy cash balance you once had has been eaten away operating costs of your business and replaced with a larger debtors balance (money owed to you).

 

 

 

Construction Accounts for 8% of Australia’s GDP, yet this sector alone accounts for 21% of insolvencies.

 

Act while business is good…

The key is to address cashflow problems while your business can still absorb any issues that might pop up. Once you are in the middle of a cashflow crisis it’s too late… you have to work that much hard to dig yourself and you won’t have a healthy bank account balance to bail you out. However, if you had identified some issues and implemented some policy updates you stand a much better chance of riding out the storm.

 

 

…on average, it typically takes 45-60 days to get paid…

 

There is a reason cashflow is one of the most common issues on the business owners mind,you have had to tackle the problem time and time again and you will need to again in the future. So what can you do? Arm yourself with the right tools to reduce the number of issues on the horizon and have plans in place to proactively manage cashflow and you will also sleep better at night too. Life is too short to worry about paying others after all who is up all night worrying about paying you?

 

 


 

Written By: Joshua Gloede

The Financial Foreman

 


 

References

  1. Xero website, Home – Small Business Insights (Available at: https://www.xero.com/small-business-insights, Last accessed 27th February 2018)
  2. Australian Department of Industry, Innovation and Science website, Australian Industry Report 2016 (Available at: https://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/AustralianIndustryReport/assets/Australian-Industry-Report-2016-Chapter-2.pdf, Last accessed 27th February 2018)
  3. HuffPost website, Don’t Let Your Small Business Become An Insolvency Statistic (Available at: http://www.huffingtonpost.com.au/2015/12/10/business-fail-avoid_n_8679352.html, Last accessed 27th February 2018)

 


 

""/
Technology

The Cost of Remaining Technologically Illiterate

How Time is Being Wasted

In the 8 years I have been working as an Accountant for the Construction and Trades industry; I have noticed a recurring theme amongst businesses operating within this particular sector. Business owners often took time off the jobsite or worked long hours in the home office in their ‘downtime’ to catch up on quoting, invoicing, organising future jobs or answering emails and telephone enquiries. This got me thinking how much time are business owners wasting on admin tasks?

On average Australian small business owners spend one third of their time on administration tasks. Now I know what you are all thinking this is what’s expected of a business, this makes sense if you are working with the Amish, without the use of the internet, tablets, automated procedures and cloud solutions. Why on earth would a business willingly spend 83 days1 a year on admin tasks? I’m disgusted by these numbers, technology is so easy to use and implement why cart office supplies up the stairs when you can use the elevator? Time is money and every hour spent on administrative tasks is an hour taken away from your family or from the business hindering the business’s ability to grow. In order to put a value on the hours spent on administration tasks we needed to assign a value to that time, the average tradie earns $60 per hour2. On a basis of 83 days a year at 8 hours per day that’s 664 hours a year on admin tasks equating to a recurring cost of $40,000 every year.

“On average, Australian Small business owners spend one third of their time on administration tasks.”

There is fear of change; then there is Submission to the Familiar

I know technology is often thrown around as the silver bullet that will save the construction industry, we have been hearing it year after year for decades. All business like to say they have embraced technology and innovation, they even have those words plastered on posters around the office to show how innovative they are. It’s not technology or innovation that will save your company, it’s how you integrate them into your business processes.

Let me provide an example for you. There’s a celebrity, we shall call her ‘K’ nobody quite knows what she is famous for but she makes the most of her limited skills and more power to her. K was in the city for a fashion show with a lot of expensive jewellery, so she made sure to book into a prestigious and secure hotel equivalent to her celebrity status. Unfortunately for K she was robbed by 5 men that were able to walk off the street into the hotel, is the security technology to blame? No, it is how the technology was implemented that caused the lapse. That is the key, you must be able to measure the benefit implementing the technology. Otherwise you are throwing darts at a dartboard with blindfold on, sure you might get lucky but why take that risk?

Why take my word for it? IBM conducted their own research into the benefits of cloud computing. I summarised some key improvements from real implementations below: 

IBM Findings

Capability

Are of Saving

Hardware

Utilizing resources by using virtual serves

System Administration

Reduced system administration and operating costs in cloud infrastructure

Processing Efficiencies

Labour savings from request management, automation and standardisation

Improving Productivity

Reduced Idle, waiting time and increase flexibility

The same report found that cloud technology can decrease operating and labour costs by 50% through automated provisioning and standardisation; reducing admin costs to 16.5% for Australian Small Businesses (previously 33.33%), that is a saving of $20,000 by implementing cloud technology. By implementing cloud technology you haven’t just saved money you have created more time 41 days3 to be precise.

“…cloud techonlogy can decrease operating and labour costs by 50% through automated provisioning and standardisation.”

Now what have we learnt from K? That we should keep valuables off social media? No, that if we are going to be implementing new technology we must be able to measure the benefit to the business. How do we achieve that by implementing a technology infrastructure that is built for scale and will evolve as your business grows. Resulting in streamlined processes, workflows and timely data that will leverage your business for growth and save you money. A fully integrated tech deployment will cost around $15,000 to implement, that’s a return of investment of less than one year. The savings are compounded and the return on investments increase with each year.

To sum it all up, Cloud Technology and its integration into today’s businesses operations is – and should always be considered – an investment. Like any other investment, when we start to notice it being successfully leveraged by other businesses and competitors, we do not sit idly by as we watch others succeed. Cloud Technology is no different. The question we must ask ourselves is no longer ‘Whether we will Adopt the Cloud,” but rather, “When do we start; and are we too late?”

||

One Final Note from Josh

If you are toiling away year after year striving to grow your business but not getting anywhere are you suffering from the Taylor Swift effect? No Taylor, you can’t make them stay but repeating the same process over and over will lead to the same effect, a change is needed. I practice what I preach, I have implemented this process with my clients and I actively work with them to grow their business. With the right accountant you will know the difference between and expense and an investment. The norm right now might not be the norm in the future, complacency can kill a career just ask Seann William Scott.

Joshua Gloede
Accounting Partner


Written By: Joshua Gloede


References

    1. Melanie Burgess. (2016). Plumbers, electricians Australia’s richest tradies, charging more than the average lawyer. Available: http://www.news.com.au/finance/work/careers/plumbers-electricians-australias-richest-tradies-charging-more-than-the-average-lawyer/news-story/4fee7c5920ff4624e53c5ca20f99e3cb. Last accessed 27/10/2016.
    1. Mike Ebbers. (2009). Cloud Computing: Save Time, Money, and Resources with a Private Test Cloud . Available: http://www.redbooks.ibm.com/redpapers/pdfs/redp4553.pdf. Last accessed 27/10/2016.
  1. Yolanda Redrup. (2013). Small business owners wasting time on administrative tasks, research finds. Available: http://www.smartcompany.com.au/business-advice/strategy/32187-small-business-owners-wasting-time-on-administrative-tasks-research-finds/. Last accessed 27/10/2016.

Calculations

    1. 5(days) x 52(weeks) = 260(Trading days), – 10(Public Holidays) = 250(days working per year), x 33% = 83(Working days lost from admin).
    1. 83(Lost days) x 8(hours in standard trading day) x 60($ per hour wage) = $39,840(Lost per year).
  1. 5(days) x 52(weeks) = 260(Trading days), – 10(Public Holidays) = 250(days working per year), x 16.5% = 41(Working days lost from admin after cloud integration).
Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy
Youtube
Consent to display content from Youtube
Vimeo
Consent to display content from Vimeo
Google Maps
Consent to display content from Google
Spotify
Consent to display content from Spotify
Sound Cloud
Consent to display content from Sound