Being Financially Prepared
It is no lie that being financially prepared takes a lot of discipline and patience. However, the benefits to a financial account that is well taken care of can never be denied.
After the first and second episode, BIll and Matt hop back in the booth to finish their awesome podcast series revolving around tax and accounting for tradies.
“Being financially prepared is something that you constantly do.”
Do you want to find the answers to all your questions related to tax and accounting? Learn a whole lot of new and interesting things in the culmination episode of this podcast series with Bill Petrovski.
Get The Full Podcast Transcription Here
Matt Jones: [00:00:00] Hello listeners and welcome back to the third and final episode of this series I’m conducting with my cohost Bill Petrovsky from Hall Chadwick chartered accountants. This series we have been talking all things finance for trade trade. Business owners are the first episode we’re talking about spending your money wisely. And then the second episode the previous episode we were talking about how to structure your finances.
And now in this episode we’re going to talk a little bit about being prepared financially prepared and it will Stem in to the previous episode. We did talk a little bit about sums of how to structure finances in the way of figuring out what your cost side or that kind of stuff so I would encourage you to go back and check that one out. But in this episode we go to talk a little bit more in a little bit more depth about some of those specific areas when it comes to being financially prepared for business owners. Bill welcome back.
Bill Petrovski: [00:01:01] Thank you Matt and hello to all listeners.
Matt Jones: [00:01:04] So Bill it’s been a great couple of episodes are very informative and in this one here we got to tie it all together with financial preparation because it’s probably, be fair to say that this would be probably the most relevant episode of all of them we probably could have even done this one first because unless you are prepared unless you’re planning things that’s very unlikely to go the way you wanted to, right?
Bill Petrovski: [00:01:30] Yeah that’s right. I think you know we’ve been through spending your money wisely and that yeah you’re right probably reverse already spending your money wisely. Second we did around structuring your finances will be based on I guess being prepared and therefore that’s what we’re talking about now is how do we get prepared. What does that actually mean. And once we are prepared what does that allow us to do. So, yes this is always a very important topic in any business owners minds you’ve got to have this up your sleeve not to make decisions on the first and the second topic so
Bill Petrovski: [00:02:04] It’ll be interesting once good
Matt Jones: [00:02:05] So I think by being financially prepared is also something that we although we may definitely associate with planning for what’s coming I think it’s also pretty relevant to you know make sure that you’re doing this on a regular basis like it’s not it’s not like a set and forget scenario.
And I’ve learnt you know within my business is like if it’s if I’m not keeping on top of things. You know on a weekly basis weekly monthly basis it makes it that much harder to steer the ship in a different direction when you’re three months down and you figure out that you’re behind on figures. So I think having that preparation in place where you’ve got a more granular overview in bite sized chunks and setting those goals and making that apparent you know more regularly revisiting it more regularly so you can make those minor adjustments. That’s kind of reduces the need for making those massive adjustments.
Bill Petrovski: [00:03:09] Yeah Matt. I guess is not secret in anything we do right. I mean the better prepared you are, the better you plan for something
Matt Jones: [00:03:17] It’s true.
Bill Petrovski: [00:03:17] And hopefully the better outcome you get. So really you do. Once you do it right but that’s not enough.
Matt Jones: [00:03:25] Yeah.
Bill Petrovski: [00:03:25] It’s the ongoing debate revisited. You know what have I done. What am I preparing for. What have I planned and have I hit that goal have I not if I haven’t why didn’t I? And if I need to do something different, what is it? It is constantly you’re right. You got to constantly look at it and say well we set out on this plan.
We said I’ll add on this budget or whatever the case may be. We had some goals that we wanted to achieve and you’ve got to look at it intermittently throughout the period and make sure that we’re on track. If we’re not on track, what have we done wrong or what do we need to change to make sure we get back on track.
Bill Petrovski: [00:04:00] Or maybe we need to change our goals and that’s going to come back at you know having that first plan in place and looking at it regular to say well how do we make sure our business is ready to take a different tack. And you know one of those things is really if the shit hit the fan and we need to take some action. Are we capable of doing it can we change something quickly?
Matt Jones: [00:04:21] I’ve always struggled, Bill, with the I won’t say struggling with goal setting like goal setting has always been fine but turning the goals into making it like a realistic achievement and it’s something that I’ve learnt over the years and once I’ve learnt how to you know, while don’t get me wrong, I’m not like I’ve mastered it but certainly being able to tie you know like like a for like a financial plan into an actionable list of tasks to do that you can break down and you can allocate to your team and you can do that kind of stuff like it made such a big difference.
I’m just having that overview of the organization so I’m keen to see what your you know what your experience is in regard to when we’re talking about being financially prepared how that correlates to you know the delivery of your product and the delivery of your service and the way that you handle your staff you’re dispatching all that kind of staff.
Bill Petrovski: [00:05:30] Yes. So as you said there I think we like to break it down into various modules and you probably have to look at a couple things. One is we’ve talked about before, cash flow. So what is it look like today. What have I got in reserve in the tank to make sure I’m covered for how far down the track. So really that’s the finance discussion cashflow staff. So am I adequately resourced staffing wise? Can I get the job done if I want a new contract or I’ve got this new contract or job? Do I have enough manpower to make sure I can deliver on that. If not what’s my plan.
The other thing is operations generally. So you know making sure we’ve got the right supplies they’re onboard with us, they supply regularly. We know that it’s reliable, it’s good product, and whoever else is part of it. If we got installers or we’ve got other subs that were used as part of our process that whole operation to make sure that we’re doing what we said we would do in the right timeframe. And then there’s the big picture stuff which is really about you know what’s the medium to long term hold. So what I want to achieve for that next six months 12 months or two three five year plan and how do I get on the right path for that.
So you’ve got to break it down to those little elements and each element then has you know what do we do the next month will do for the next three months and continue reporting back on the big picture stuff.
Matt Jones: [00:06:56] So you know we’re talking about cash flow and cash reserve obviously allocates money in the bank. That’s great but cash flow when we’re talking about forecasting and I’ve always had a problem with forecasting because I found like it’s like the difference between you know a strategy and a goal or sorry a goal and a wish is typically strategy it’s like when you’re trying to forecast and I’m sure there’s listeners out there thinking okay this is great.
Like I said I want to make you know a hundred grand next month but like that’s a wish until you’ve got some sort of strategy behind it that can help you deliver that. Now I’m not sure Billy is that really like the role of an accountant to sort of help them do that or is it more like. Where does that information and where does that help typically come from. I mean obviously you say okay great you know like a hundred grand a month.
That’s great. You know this is what these are the metrics you’ve got to make sure that this is what you pay staff all that kind of stuff. But then how does that correlate to actual deliverables
Bill Petrovski: [00:08:06] Yes so I mean I think there’s always the starting point and the starting point is looking
Bill Petrovski: [00:08:12] At today. You look at your numbers today and I guess what you’ve done historically it’s always a good point as to you know we’ve got to start here and if we’re starting here today what do we have behind us knowledge wise to tell us why that goal or that forecast is achievable. So if we have that knowledge today about that all that information about sleave that’s where I guess you know from a numbers perspective if we want to achieve and sit out on a certain path in trying to achieve these goals well what numbers what resources do we need in order to get that outcome.
So for example if we see that example of 100 hours of profit a month well we need to have a million dollars a month of revenue at the moment. What we know is maybe 700 thousand dollars a month of revenue okay. So now we need to get in maybe a sales coach or we need to get in the marketing guy and say well who and what are we going to do to drive our new revenue what do we need to target now it cannot can’t say what target customer X Y Z or well this area he or this geographical space will do something online but I know numbers as well we’re never going to hit 100 grand profit a month unless we’re doing a million dollars a month revenue.
Bill Petrovski: [00:09:30] So how do we get menials of revenue. Well if we’re short 300 a month. What do we do about that. Now let’s bring in the next person who is going to help our business get on that right path. So really you know that having that financial plan drives what is next in the business. And we talked about it I think in earlier cars as well around bringing the right person at the right time with the right specialist for that advice getting it wrong is going to cost you far more down the track so get that right person in at that right time to say well this is what we’re trying to achieve how to achieve it. Okay we need this person to come here and help us in the business.
Matt Jones: [00:10:05] So if we go a little bit more macro wow we talk to I suppose maybe a little bit more realistic too busy out there like people who don’t get a month like I kidding you have a bit of a time about a month. Like if we could break it down a little bit so some of the things like from that I’ve noticed over the years which have been important and fundamental to being financially prepared have been things like implementing a cloud bookkeeping software implementing a customer relationship management program that I can track leads and conversions and sales through things like the things that give me a bit of an overview as to what’s in that what’s happening financially and then what’s happening in the lead up to basically fill that financial funnel if you want to call it that. So when you go through the financial preparation process with your customers what frameworks do you typically follow in regard to that sort of thing.
Bill Petrovski: [00:11:11] Okay, so the framework I guess and probably a very good example obviously relevant to us in terms of what accounting platform or software you use to report and record it etc.. I guess when you’re going down that path the framework will probably get the path of saying one firstly can we save money? Are we spending money on things that is not efficient not required or something we can do better. So down the path of that software question if we spend fifty thousand dollars on overhauling our backend software and the whole way we record jobs the whole way we account for them. Our project management tools and we might spend 50 grand upfront to do it but if that means we’ve got one less employee and that employs costing us 70000 all the year well after year one we’re going to be 20 grand better off.
Matt Jones: [00:11:58] Right.
Bill Petrovski: [00:12:00] We’re going to immediately have another extra 70000 dollars drop into our bottom line right now off the back of that you’ve now got a system or a process in place that should theoretically be more scalable. So if our revenue went up you know 10 grand a month theoretically we should be able to do that without adding extra cost to it so that 10 grand a month if our margin is normally 40 percent well all of a sudden that foreground the month is immediately dropping to our bottom line profit.
Matt Jones: [00:12:29] In
Bill Petrovski: [00:12:29] It’s not getting at or extra resource so the two elements are one costs. Can we save costs by doing something more efficiently or getting rid of something that is not essential to our business. That’s one, and then two I think the other side is always revenue right. So how do we drive more revenue how do we make that revenue more efficient? Make it more productive maybe increase our margin can we do that whole job better and our existing revenue might be again for all intents and purposes 100000 dollars a month. But at that hundred thousand dollars a month if we went to 150 a month we don’t want to just drop 10 grand extra to our bottom line at 50 grand has to be scalable in a way. We’re out of that 50 you know 20 grand a month is going to our bottom line.
So it’s going to help us get there quicker because we’re scaling what our business looks like today compared to where we wanted to look like in the future. So there’s the two elements one on the cost side and to the revenue side and that’s where again from the cost side I guess that’s where as accountants can certainly drill down and find inefficiencies and find ways to do things better on the revenue side. You know it could be marketing it could be spending money with a sales consultant or sales person tend the documents right. Whatever the case may be and going in the right people at that level because we spend X dollars on getting that right it’s going to deliver that new revenue. So…
Matt Jones: [00:14:04] There was an interesting question in their community a couple of years ago from one of our members and he said he wanted to. He asked you know when’s the best time to bring somebody on. Is it in the planning stage or is it when you’ve got the money and I um I had a couple of my colleagues on the show out of the US cohosts that episode it was hilarious but um yeah we basically that everyone came back with Well I mean these guys both in finance over there as well and they said effectively yeah you’ve got to make sure that the money’s there you don’t wanna be going employing you know these overheads kind of ties back to what you said in the preview episode.
I think that that example with the guy who went and bought all the joinery equipment without actually having the joinery work like you want to make sure that you’ve got the money coming in which can justify it or at least I would say maybe you know that we’re talking about preparation. You know you’ve got a clear plan on where that money is going to come from. That’s another thing isn’t it. Like yeah okay this is where I want to be and this is how I want to get there. But in order to get there I need to have these people in place in order to deliver that. But then in order for me to put those people in place I’ve got to have the money to fund it. So it’s quite like a chicken or the egg right.
Bill Petrovski: [00:15:25] That’s right you know and it’s always an interesting one I guess in terms of discussion now I guess hence why when we talk about being financially ready and having that plan in place is something that you don’t just do once and it’s stuck in the back drawer and away we go. It’s something that you do it and you’re gonna constantly revisit it and constantly revisiting means okay well am I in a position now to do what I want to do if I’m not okay well maybe I should extend that plan out bit But, in the meantime as we all know when we run our business we’re doing things at the same time. So while I’m doing the plan, I’m also trying to get that new revenue. I’m also thinking about that new machine.
I’m also telling the bank why that should lend me the money and all these things got to be brought together. So the better organized you are the better you’ve planned all all that out and being financially ready means when the right time is there and you say oh Mr. Banker we’ve just won this new contract and we need to buy that 300000 old piece of machinery to deliver on that. They’re going to sack these 10 things from you. Okay well I’ve got em I’m ready. And here they are today. Let’s make a decision quickly. So it’s being ready to do all those things at once and you know in a perfect world you want to have it all lined up where you’ve got the revenue you can get it lined up in three months time after the banks give me the money to go and get that equipment but we all know in business these things have to happen in a short space of time.
Bill Petrovski: [00:16:53] We’ve got to make things happen based on what we anticipate. So really we’ve got to look at always being financially ready, having the plan in place, and having the documentation to do things and that comes back to one other things that I haven’t spoken about too much is compliance do we have all our taxes up to date. Do we have all our accounting records up to date. Are they accurate. Do they paint the picture that we need to present to the financier that says we can afford to do this and therefore you know the more the more we can demonstrate that we are ready and we have been thinking about this and planning it for the last six months. Well Mr. Banker where you are. Look how long we’ve been working on it. We’ve got all our I’s dotted and all the T’s crossed and this we’re going to make a really easy decision for you because everything that we’ve given you here that we have ready because we’ve been working on it for months demonstrates to you why you should lend us that money.
Matt Jones: [00:17:47] So when we’re talking about I suppose an overview I honestly this the most valuable thing for me in the business is spending a couple of hours a week looking over finances reconciling accounts and just getting getting like making sure that everything’s tracking in the way that it should be. So I can’t recommend that enough to people will just find the time make the time. You know I wouldn’t even even make it optional which is just do it get it done.
Bill Petrovski: [00:18:17] Yeah, because I think the hardest part is doing it first. Once you do it first the on going management of the information or looking at it regularly should become somewhat easier. So in my business you know we’ve got over 200 staff and I know exactly what is going out the door every single week
Matt Jones: [00:18:34] Yeah.
Bill Petrovski: [00:18:34] Before it’s happening and I want my wage bills are want my rents and I want my generally my trade credit asar so I know what I need to collect today in order to make sure that next week and for the next 90 days I’m going to be covered because I know exactly where my costs are and I know that because I did all the hard work at the beginning to get it right get in a format that’s understandable and something that’s going to be presented to me each week or each month in a way that I want to see it. And once that hard work is done upfront it’s just a matter of then getting that information. Glancing at are we on track. Yes we are great. If we’re not on track what do we need to change. And that’s the part where the hard work is at the beginning. The ongoing work should be substantially easier as you go and then you get more comfortable with it because you know exactly what was happening each week to week.
Matt Jones: [00:19:21] Yeah that makes sense I suppose you just once you’ve once you’re in the groove it kind of you’re basically just following a rhythm. But I find I mean I don’t know I find as well even just looking going back and checking metrics which may not seem you know what most people might look at are things that I necessarily don’t look at like things like group engagement or things like how many people have downloaded you know things from the website and you know little things like that little metrics and trying to get a gauge on how that reflects and ties back in to profits and sales and all that kind of thing.
I find that stuff, well I can’t believe I’m saying this but I actually kind of find that stuff really interesting these days getting that getting because you can kind of once you understand that you can pretty much dictate that you can be okay with this. This is how if I do this, this, and this then I know in the past it’s done there. So if I do that again then chances are it will do it again. Kinda like a bit of a roadmap for yourself.
Bill Petrovski: [00:20:30] Yeah, I guess you’re talking about one of those KBR is one of those levers that you know we can influence and if we influence this one lever what impact is that going to have on the remainder of my business and what’s that going to deliver financially. And again that’s all the things we’re. I mean there’s so much data out there these days you’ve got to pick through what’s important to you to make that decision it was important to you.
It’s going to be different to what’s important to the bank that they want to see if they’re considering lending me some money. It’s going to be different to the customer that you’re submitting attended to that wants to see that you can deliver on this outcome that you say you can in that timeframe. And you know information and all that is readily available and I’m sure it’s probably at your fingertips but at any one point in time you will filter through all issued information and say Well right now I just need this information.
Bill Petrovski: [00:21:19] But based on that information and the customers I want to see that in order to be able to make a decision that I’m financially viable or that my business is going the right direction. So you know as business owners we’re looking at these things we’ve got to understand them all and hopefully at the right time you are ready because you’ve done all the hard work in the planning upfront and the goal setting and you’ve got your team on board and they’re all doing the right thing and they’re assessing the same information like you are knowing that you know to achieve this goal that’s what we need to do and this is the information that we have to get there.
Matt Jones: [00:21:51] Brilliant. I might well look I think that pretty much wraps that episode up where you think you’ve got anything else you know.
Bill Petrovski: [00:21:58] I think we’ve covered in amongst all those three casts. I think we’ve…
Matt Jones: [00:22:02] Laughs.
Bill Petrovski: [00:22:02] Covered a lot. You know hopefully it’s accounting and tax we’ve made a little bit more exciting for listeners out there. It started out in the first cast but yeah at the end of the day I think having happy to answer questions having to help and ultimately reach out either online or of the platforms or have to get face to face and that’s where we can add some real value.
Matt Jones: [00:22:24] So this is out there. Bill is in the community so have you any questions. By all means jump in there and ping him. hallchadwick.com.au is the website you can find Bill @BillPetrovski on Twitter. He is on linkedin as well. I’ll post some links to those handles within the show notes so if you want to. If you don’t want to pull the car over and screaming.
Matt Jones: [00:22:51] Halt and write that stuff down you don’t have to because it will be in the show notes. Bill thank you once again for your time. It has been awesome. We look forward to having you as a part of the community and for the listeners out there if you have any comments or follow up questions for Bill. The community probably the best place to get it. Otherwise if you see this come across any of your social media channels this podcast or if you see it come through in an e-mail from us or anything like that. By all means just reply and I will endeavor to get Bill back on there to answer your questions for you. So Bill on behalf of everyone thank you very much
Bill Petrovski: [00:23:30] Awesome thank you. It’s been a pleasure being part of the cast and an ongoing involved in the community and I look forward to hopefully helping a lot of business out there.
Matt Jones: [00:23:39] You’ve done a grand job of making an unsexy topic very sexy Bill.
Bill Petrovski: [00:23:43] Thank you
Matt Jones: [00:23:44] All right, it’s a wrap.
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