It’s time to take some action inside your business; do these 10 things now to be ready for whatever lies ahead.
It has been said before that “business likes certainty,” as if there ever is such a thing! There may be a perception of certainty, but the facts are that nothing is ever certain and we live in an unpredictable world. In any case, right now, in light of all of the changes being made at the federal government level, things do seem more volatile and less certain. So it’s time to take some action inside your business to be ready for whatever lies ahead.
Here are some things I would do if I was running an AEC firm right now:
- Get all the credit you can. Now is the time to take a look at your banking relationship and get the largest line of credit you can get nailed down for the longest possible term. You may never even use it at all but if you do find yourself in a tough position you will be glad to have it so you have time to get through it. You may also want to look into converting some of your existing line balance into amortizing debt if that gives you more total credit. Talk to your banker!
- Get your cash flow forecasting working properly. It’s not that hard to do a week-by-week cash flow forecast that shows whether or not you will be up or down. A simple spreadsheet will do. Put weeks across the top. Then vertically list all of your predicted cash in categories and all cash out categories. Start with cash on hand and look week by week to see if you will have the money you need or not. If not, take action to stave off the problem.
- Speed up billing. Never wait to bill all your clients at a certain time every month. Bills need to go out as soon as your contract allows you to bill. Clear out all the impediments to fast billing now. The longer you wait to send a bill the longer it’s going to take to get paid. So why lose even a single day? Time is the enemy.
- Clear out unbilled WIP. This is a problem for probably 75 percent or more of the companies I have worked with in this business. They allow unnecessary unbilled WIP to build up because they’re not getting extra services agreements signed and not managing their projects and clients like they should. Too many times the unbilled WIP is not dealt with until long after the job is done, which makes it nearly impossible to bill and collect on. Why wait? Do it now.
- Be sure all of your collection processes are being followed. My experience is that when times are good, companies get sloppy with their collection efforts. It’s not a big deal. Well, at some point it could be! Every step – emails, calls, duplicate invoices, etc. – all must be followed all of the time. If your CFO or business manager is not doing this, sit him or her down and give them a “talking-to” NOW about the importance of following the process diligently!
- Report daily on cash and sales. If you want your people to take this stuff seriously and really make it real, report on cash in versus cash out and report on sales of new work DAILY to all employees. It’s not hard to set up and crazy not to do so in my experience. Ignorance is not bliss.
- Track and report on working capital. Current assets less current liabilities is another number you should track and report on at least weekly. Then show it graphically over time. If working capital is going up, feel good. If it’s going down, take action.
- Shore up your balance sheet. Is it time for all of your owners to kick in some more cash to solidify your balance sheet? Should you open up ownership opportunities to more of your people? Do you have depreciated real estate on your balance sheet that you would be better off selling and leasing back to improve your balance sheet and borrowing capacity? These are important questions to ask and answer.
- Tune up your marketing. Do you know where all the marketing dollars are going? You need to take a hard look at all marketing activities and expenses. And remember, the number one marketing expense in most firms is the labor of design and technical staff charged to business development. Does this reflect real activity, though, or is it just a catch-all account on everyone’s timesheet that looks better than “non-billable?” My experience is most of the time the charges are not really valid.
- Overcommunicate with your people. A weekly email from your top person that explains what is happening is always good. Keep everyone going the same direction. Relieve anxiety by explaining what you are doing as management, and why. Send it out on Friday afternoon to everyone.
I can assure you that doing these 10 things will make you better prepared for anything that lies ahead. They really are just common sense actions, so don’t fool around. Act now.
Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.