A member recently gave me a call. His company was struggling. He’d have a few good months followed by two or three months in which he was losing money. He couldn’t figure out what the issue was. I asked him to send me his financials—and that’s when I knew there’s a reason why he didn’t know what his problems truly were. His financials were in disarray.
How are your financials? Are they structured properly? Do you feel uncertain about what each number really means and what it might be hiding behind the health of your business? If you aren’t receiving departmentalized financials every month, I understand why you’re nervous…and it’s why you should be calling me—immediately.
Making it through tough times is like navigating a barrier reef on the choppy sea in the dead of night. One wrong move could create a catastrophic loss. Well, if it’s no longer smooth sailing, do you want to sail into rough waters with your eyes closed? That’s what you’re doing when you don’t operate from departmentalized financials.
Departmentalized financials split your financial results according to the divisions of your company, and in tough times, it allows you to make very important and informed decisions.
The separation in your business should begin at the top. Start by separating out the different disciplines that are involved within your company. For instance, if you perform new construction work, commercial work, and residential work, you should be receiving a separate financial report from each of these disciplines.
Once you’ve broken your financial statements up by discipline, it’s time to break them out even more. For the best results, you should be receiving a separate financial statement for each area of your business. That means in the residential business, you should be receiving a separate financial statement for your replacement business, your service business, your gutter business, and any other area of residential work—and other disciplines will be divided similarly.
When you have departmentalized financial statements, you’ll be armed with a great tool to lead your company through even the most turbulent times.
What to do with them?
Great, now you have departmentalized financials coming in every month, but so what? How do they allow you to get control of your company and stay on track to success?
Market where the money is
One important rule of success is never to throw good money after bad, and if you’re marketing each division of your company with the same level, you might be doing just that. After all, if you don’t have the results of each division broken out separately, you’re probably throwing marketing dollars into a part of your business that isn’t producing appropriate returns. When you have your financials broken out properly, you can see which area of your company is bringing in the profits, and you can focus more of your marketing there to make those returns even better.
Trim the fat
A penny saved is also a penny earned, and departmentalized financials give you the tools you need to effectively cut costs in your company. Departmentalized financials are like a sleek, sharp steak knife that you can use to trim the fat in all of your divisions. Your company will become lean and mean.
And with the money you save, you’ll be ready to seize opportunities that pop up for you, or you can simply put that money to work in other areas where you need it most.
Reward the deserving
The top performers in your company are the people that you really want to reward for their contributions, but how do you know what results they are producing if they are lumped in with everyone else? With departmentalized financials, you’ll see where your top performers are and who might need some additional training or help.
Take timely action
The most important reason to get departmentalized financials is that they are built for speed. When you get them, you can digest them quickly and take action to correct the areas of your business that are falling behind. When your profits are on the line, you don’t want to take any longer than you need to in order to correct a division that might be falling behind. Departmentalized financials give you timely action to turn a bad month around before it gets away from you.
When you have departmentalized financials, you’ll have a solid reporting system in place to show you what is really happening in your company. The costs and revenues in each division are so vastly different that this is the only way to get a true glimpse of what is really happening. If you’re commingling expenses, you undoubtedly have inefficiencies you aren’t even aware of. And if you’re commingling revenue, you may not know when you need to focus on a different area to boost revenue.
The point is, if you aren’t departmentalized, I can virtually guarantee you have a major problem in your business that you are not even aware of. That’s why it’s time you call me immediately so we can get your financials in order, and you can put an end to any tough times you might be experiencing.