ShedTitans Technical CFO for the Shed Industry The shed-industry practice of CodeHaus

05 Finance

Do your numbers guide decisions or create confusion?

One January a shed builder texted me after his tax return came back. The numbers didn't look great, and he wanted to know what went wrong.

Within five minutes we knew. Raw material had gone up 5 to 10%, and the prices hadn't moved with it. The fix was one of two things. Fix the buy, or raise the price.

Nobody decides to sell a product at a loss. It drifts there, a few points at a time, and the P&L won't show you which product slipped. It adds up whatever the books are fed and puts it in a total. Caught at tax time, that drift cost a year. Caught the month it happens, it costs a month.

How hard is it to get these numbers?

Seven questions. For each one, pick how hard it would be to get the answer today. Then I'll email you what your answers mean and where to look first.

1. How much of your bank balance is free after the next 90 days of commitments?
How to find it

Look at your bank balance today. List everything already spoken for in the next 90 days: payroll, taxes, loan payments, vendor bills. Subtract it. What's left is what you can actually spend or invest.

2. What's your gross margin on each of your main product lines?
How to find it

Calculate gross margin for each of your main product lines over the last twelve months. Which make the most, and which make the least? Then ask whether you trust the cost side of that math, overhead included, enough to set prices from it.

3. How far does cash drop in your slow months, and how much financing is lined up to cover it?
How to find it

Chart monthly cash flow for the last 24 months and mark the seasonal pattern. Write down how you get through the slow months now, and whether you have financing lined up for building inventory or covering expenses when revenue dips.

4. What's sitting in accounts receivable, and how old is it?
How to find it

Run an aged receivables report. Work out what share is 30, 60 and 90-plus days old, and what share of a year's revenue is tied up in receivables.

5. What return did your big investments from the last year bring in?
How to find it

Pick three significant investments from the last year: equipment, a marketing push, a new hire. For each, can you work out the actual return with confidence? If you can't, you've been making those decisions blind.

6. How many decisions did your most recent financial statements change?
How to find it

Look at your most recent statements and name the decisions you made because of something in them. If they mostly go to the tax preparer, they aren't doing their job for you.

7. How accurate are your forecasts, and how far out can you trust them?
How to find it

Compare your projections from six months ago with what happened. Check revenue, expenses and cash. Then decide how far ahead you can forecast with confidence: 30, 60, 90 days, or longer.

Or I check it for you

In the audit, finance is where I rebuild margin by product from your own records and check it against the books. I trace where the overhead in your pricing comes from. I look for vendor bills that run over the quote and get paid anyway. Many findings come with a dollar figure, and those go to the top of the list. Some don't, and I won't make one up.

Two weeks, $3,500 flat. If by the end of the first week I can't get to the data I need, I'll tell you then and refund the fee. You walk away with the build order, whether you ever hire me again or not.

Talk to Matthias about the audit