PrintEmail

Starting up any type of business is rarely easy. Running a service based business where you are selling not only products but labour can be very challenging to manage. There are many issues that can affect efficiency, profitability and cashflow. How you manage jobs and work in progress can have a real impact on your sanity as a business owner/manager.

Here are some of the benefits of good “Job and Work in Progress Management”

• Job profitability (more profit from each job).
• Cashflow improvement (cash comes in quicker and stays in your account longer).
• Customer satisfaction (because jobs are easier to manage –customers are too).
• Better personnel productivity (more productivity for your wages bill).
• Ease of information management (find all paperwork relating to jobs easier).

Let’s look at each of these benefits and how they can be achieved.

Job profitability
Many businesses don’t measure their overall profitability on a regular basis, let alone their job profitability.

No matter what type of business you are in, whether it is selling products or labour, or both, you need to know which products/services is contributing profit into the business. The reason you would want to measure job profitability is so that you can see clearly which jobs are profitable and which ones are not. Once you know which is which, you are in a position to investigate why a job was not profitable.

Okay it may be too late at the end of the job to do anything about turning it around, but you can learn from the experience for the future.

By breaking down a job into labour and materials and setting a budget for both, you can analyse where the problem occurred to result in a loss on the job. Once you know where the problems are, you can manage the situation better in future, by improving quotes and/or efficiency.

Cashflow improvement
Jobs can’t be converted to income until they are finished or completed to an agreed stage. If you don’t have good job management in place, it can be very difficult to know when it is the time to invoice the job.

When you have many jobs running at once it can be very difficult to manage them in your head.

There can be all kinds of reasons why jobs get held up e.g. material delays, misunderstandings re labour requirements. To try and remember everything and manage it in your head, or the old fashioned way of manual job cards may be fine if you only have a couple of jobs, but if business is growing you need to find a better way of coping.

Work in progress or not invoicing jobs at the first opportunity equates to your working capital being tied up.

That is you have money tied up in the wages, you have paid staff and for materials. If you have paid for these prior to invoicing your customers, then you have to find the funds to cover these costs until your customer pays.

The longer you take to invoice customers and wait for payment, the more working capital you need to run your business. These funds may come from your own pocket as the business owner, or from an overdraft or business loans, all of which can be very expensive in interest.

It makes sense then to minimise the need for loans by speeding up your invoicing of jobs. If your business is growing rapidly, this is one area you need to get organised, well in advance of taking on lots of jobs.