Line Items To Scrutinize When Struggling Financially
A reader writes: "I recently assumed marketing responsibilities for a cleaning service that has gone through the loss of the founder. We appear to be losing money. What should I do?"
I am concerned with your comment that you "appear" to be losing money since it indicates that you may not have good accounting/bookkeeping in place. It appears that the founder kept the financials very private so that he was really the only one who knew income and expenses for the last few years. You mentioned that he had not developed any new business and seemed reluctant to increase the charges in spite of most expenses increasing over time. Your first and most important job is to find out where the company is finically and make decisions based on data, not appearance or feeling.
Since I have not seen your financials, I can only make general observations based on very limited information. A very simplistic example is that if you are making $100 per month and spending $150 during that same time period, you are in deep trouble and need to determine what is going on.
Some areas to scrutinize are labor and benefits first, since they make up between 55-85 percent or more of your total costs. Second, you need to look at productivity and verify that work is being performed effectively and efficiently at all your sites. Third, you need to look at equipment, tools and expendable supply costs to make sure that pilferage is not occurring. Forth, you need to look at your consumable supplies (toilet tissue, liners, soap, etc.) to determine whether you are recouping what should be a pass through cost at the very least. And of course, you need to look at billing to make sure that customers are up to date on payments.
Once you have all this information, you will need to make some hard decisions. Remember that you cannot afford to subsidize a customer and stay in business for very long.
Your comments and questions are important. I hope to hear from you soon. Until then, keep it clean...
Mickey Crowe has been involved in the industry for over 35 years. He is a trainer, speaker and consultant. You can reach Mickey at 678-314-2171 or CTCG50@comcast.net.