Struggling with cash flow during the festive season? Discover our top 5 Christmas hacks to ensure your trade business gets paid promptly. In this episode of The Site Shed, we delve into practical and effective strategies to manage invoices, negotiate payment terms, and use technology to streamline your financial processes. Christmas is a crucial time for contractors and understanding these hacks can be a game-changer in maintaining healthy cash flow.
Subscribe for more insights on running a successful trade business.
Watch the video version of this podcast at https://youtu.be/P6o6_VgVcIU
Discussion Points:
00:00 Episode highlight
06:29 Get paid before work, avoid losses.
08:00 Builders need to charge for scoping sessions.
10:38 Get variations and approvals in writing always.
14:21 Regular leads empower clients to be choosier.
16:57 Negotiating contracts can create powerful opportunities.
22:12 Add admin fee to quote, use as discount.
25:48 Hourly rate calculators help determine true costs.
28:13 Track job costs and overheads for profits.
33:11 Negotiation is essential, especially in unrealistic situations.
Resources:
Have a conversation with us! Go to tradie.wiki/pod and book a call.
Check this out:
Connect with me on LinkedIn. For more podcast episodes, you can also visit our website.
Thank you for tuning in!
If you enjoyed this podcast and this series, please take 5 to leave us a review:
Struggling with cash flow during the festive season? Discover our top 5 Christmas hacks to ensure your trade business gets paid promptly. In this episode of The Site Shed, we delve into practical and effective strategies to manage invoices, negotiate payment terms, and use technology to streamline your financial processes. Christmas is a crucial time for contractors and understanding these hacks can be a game-changer in maintaining healthy cash flow.
Subscribe for more insights on running a successful trade business.
Watch the video version of this podcast at https://youtu.be/P6o6_VgVcIU
Discussion Points:
00:00 Episode highlight
06:29 Get paid before work, avoid losses.
08:00 Builders need to charge for scoping sessions.
10:38 Get variations and approvals in writing always.
14:21 Regular leads empower clients to be choosier.
16:57 Negotiating contracts can create powerful opportunities.
22:12 Add admin fee to quote, use as discount.
25:48 Hourly rate calculators help determine true costs.
28:13 Track job costs and overheads for profits.
33:11 Negotiation is essential, especially in unrealistic situations.
Resources:
Have a conversation with us! Go to tradie.wiki/pod and book a call.
Check this out:
Connect with me on LinkedIn. For more podcast episodes, you can also visit our website.
Thank you for tuning in!
If you enjoyed this podcast and this series, please take 5 to leave us a review:
Matt Jones [00:00:00]:
Hey. It's Matt Jones here. If you wanna check out the video version of this podcast, click on the 1st link in the description.
Kathi Tait [00:00:06]:
Feeling in the back of your mind or maybe a weight on your shoulders that you're not really sure if you're making any money, and it's quite stressful. Just as is having bills, your invoice is not paid is very stressful too, which Oh,
Matt Jones [00:00:22]:
I feel a I feel a segue coming up.
Kathi Tait [00:00:25]:
Which is why I created these hacks because
Matt Jones [00:00:46]:
Kathy, welcome back to The Site Shed podcast.
Kathi Tait [00:00:49]:
Hey, Matt. Great to be here. Hi, everybody out there.
Matt Jones [00:00:53]:
We just we just figured out the last time you're on this show was February.
Kathi Tait [00:00:57]:
Months ago. I cannot believe how fast this year has just flying by.
Matt Jones [00:01:01]:
Oh, man. It's insane. You're, tuning in from Perth, from tradie books, for you listeners visit their tradiebooks.au website. We're here today in the lead up to that festive time of year to talk about the five Five simple hacks for you to get paid before Christmas.
Kathi Tait [00:01:21]:
Yes. To get some money in the bank. K, guys?
Matt Jones [00:01:26]:
Which I'm learning more and more as the kids gets old gets older is, is is important.
Kathi Tait [00:01:32]:
Yeah. Especially at Christmas.
Matt Jones [00:01:34]:
Especially at Christmas.
Kathi Tait [00:01:35]:
And And Christmas is, usually a busy, busy time of year too. So if you can simplify some of your admin and accounting processes, all the better.
Matt Jones [00:01:46]:
Yeah. And, I mean, I I I think it's probably fair to say that that's a that's a good practice regardless.
Kathi Tait [00:01:53]:
Oh, absolutely. Absolutely is.
Matt Jones [00:01:55]:
I'm actually gonna meeting you with my bookkeeper next week to discuss how to simplify mine. There's a few things in there I didn't really like the look of. So, Yeah. I guess it's a it's good to refresh the go go back to those and refresh it every now and then.
Kathi Tait [00:02:06]:
Well, I would even say that it's really important to look at those numbers very regularly. You know, if you don't look at your numbers, you don't really know what your business is doing.
Matt Jones [00:02:17]:
I did that for years. Just stuck my head in the sand and purely because, a, I was Terrified of knowing the truth. So I was like, the the ostrich, you know.
Kathi Tait [00:02:26]:
Mhmm.
Matt Jones [00:02:27]:
And second of all, because I don't really understand I didn't understand it anyway. Time. A string of dreadful accountants that literally couldn't they might as well been speaking Mandarin to me. Like, I just didn't understand anything they were talking about ever, and they were almost patronizing in the relishing in the fact that I didn't understand any of it. Yeah. That's to ICO debt and all this kind of stuff. But, anyway, the point is, you know, if that is you guys out there, then you've The only thing that changed was me taking ownership of it and wanting to learn it.
Kathi Tait [00:03:02]:
Yeah. And I think having a person who can explain things in layman's terms is super helpful too because accountants some accountants do tend to speak their own language a bit, a bit like lawyers do. And it can be hard to
Matt Jones [00:03:21]:
Well, Truthfully, a bit like plumbers do. Like, you can do it on vertical. Like, we work with we work we the amount of times when we have clients fill in, like, web onboarding forms and this of stuff for new websites. And I'm like, guys, this this you can't write this website for what you wanna hear. Like, this is gonna be gonna be written so that people actually have to squeeze. I mean, we we now just do all Copywriting. Right? Because, like, until we did that point, we would just get jargon galore full of stuff that no one understands. Yeah.
Kathi Tait [00:03:47]:
Yeah. It it it is it's like that probably in most industries. Hey. And Totally. And, you know, when it's something like your financials or where people don't really wanna know. You know? They don't really wanna look at reports and and sift through numbers. So we try and make it as simple as we can for our clients. We get on a video call, and we break it all down.
Kathi Tait [00:04:09]:
And, after a while, they understand how to read their own of financial statements, which I think is very healthy, and it gives you a lot more control. You know, when you don't really know what's happening, you have this sort of, feeling in the back of your mind or maybe a weight on your shoulders that you're not really sure if you're making any money, and it's quite stressful. Just as is having bills, your invoice is not paid is very stressful too, which Oh,
Matt Jones [00:04:40]:
I feel a I feel a segue coming up.
Kathi Tait [00:04:43]:
Which is why I created these hacks because they're super straightforward, but not everybody knows about them. And you can't assume that everybody knows all the tips, right, even if they are super simple. Sure. So shall we jump in and and talk about those? Okay. So the first1, of course, is to have a policy around getting deposits. I've heard from a lot of tradies that they don't actually even get a deposit, and some of them are just getting paid on completion. And that's a big shell out if you've gotta buy materials, if you you've gotta cover wages depending on how long the job is, of course. The longer it is, the harder that can be.
Kathi Tait [00:05:28]:
And so I always say if you can get a deposit, at least enough to cover your materials, if nothing else. And make sure that your page, you know, if it's a longer job, longer than a couple of weeks, make sure that you have sort of, like, progress payments. Now for anybody who is in the building industry, that may seem very obvious. But there's a lot of guys out there that are starting up to and don't really know
Matt Jones [00:05:58]:
this stuff.
Kathi Tait [00:06:00]:
So I think it's a good point.
Matt Jones [00:06:02]:
You know what, Kathy? Like, what we work with loads of businesses in the project space, so lots of, like, Bathroom renovations, kitchen remodeling, roofing, solar companies, and this is one thing that we try to help a lot of them implement is the, The ultimate qualifier, like, take a deposit. Because up until someone pulls their wallet out, really, like, they're still just a lead.
Kathi Tait [00:06:27]:
Yep. Absolutely.
Matt Jones [00:06:29]:
Like, we see we see it fall over all the time, you know, with contracts that just, you know, disappear because of there's no down payment or whatever it is. And so I it's it's a really big thing for you guys out there. You know, there's no like, the biggest thing that we try to help Our clients do is not is get paid before they do any work. Yeah. Absolutely. I mean, we've got builders that do, like, renovation Clients and stuff that might spend, like, quite literally 2 weeks preparing a project analysis. I mean and and for nothing. Like, just to hand it over to the not yet client who then just gives it to the next builder and says beat this by 10% of the job's yours kinda thing.
Matt Jones [00:07:11]:
Like, it's a joke.
Kathi Tait [00:07:13]:
Yeah. Yeah. And, actually, that leads into one of my next tips is, is to charge like a quote fee. Because if you win the job, you can take that fee back off their bill. But it will cover your time in going out and spending that time looking at the job. And then if it's something more complicated like what you're talking about, that's a lot of time and effort to put into a quote or an estimate for no return. You know? So depending on your trade and and the industry, you kinda gotta sort of figure out how you're gonna do it. But you don't wanna be spending that time for free because that's a loss.
Matt Jones [00:08:00]:
So I'll I'll give you the the spin that we put on this. For you guys out there that aren't doing this, take note because it's super useful. So when we were dealing with, like, we've been our builder clients, their The the sales process for them essentially is once they get the this is what always happens by the way, 100% of the time, Kathy, When business come to us, they want more leads, and we generate more leads, the very next thing that falls over is the bottlenecks in the sales process, like, a 100% of the time. Every it doesn't matter how big the business if you're doing 40 k a month through to $1,000,000 a month, it's always something in the sales process that needs evolution. And so the For the the builders, you know, when they're getting these leads before they go and put any work into, you know, drawings and all that kind of stuff, we get them charging a scope, Like, for a scoping session or scoping fee, which could be anywhere from, I think, the lowest land that that's in my bathroom rental clients might be $350 right up to somehow, you Yeah. Big home bigger home builders, it's like $12. But the point is, like, get them, get get paid charge for your time. Yeah.
Matt Jones [00:09:05]:
And And the mindset behind that is, well, if I'm gonna prepare this for you properly, then I need to spend the time to do it, and I'm not gonna be doing that for nothing because it takes a lot of work. And it does take a lot of work If you go do it properly. And on the flip side of that, if they don't do it, guess what happens? Variations. Like, all these shit they missed because they didn't put the time in that it deserved In the early stages.
Kathi Tait [00:09:26]:
Absolutely. And I'd also say that it speaks to the customer's mindset. If they're willing to pay for a scope,
Matt Jones [00:09:34]:
Correct. I mean, if you're not gonna spend $12 to get something scoped out properly, they sure as hell not gonna spend half $1,000,000 to get a property built.
Kathi Tait [00:09:40]:
Yeah. Exactly. Exactly. And, yeah.
Matt Jones [00:09:46]:
So it's it's the ultimate disqualifier Yeah. I call it. Like, if If they're not gonna pull their wallet out to get this done properly, then see you.
Kathi Tait [00:09:53]:
Yeah. Absolutely. And and that leads to the variations, tip because I've I've got a client right now, actually. He's just lost $80,000 in variation invoices because the builder's saying he didn't provide the right evidence to make the claim. He got verbal approval on-site.
Matt Jones [00:10:17]:
Yes. Of course, he did.
Kathi Tait [00:10:18]:
Yeah. And there's nothing in writing, And so now they've just gone, no. And so he's got a write off $80,000 in bad debt.
Matt Jones [00:10:28]:
Yep. Been there.
Kathi Tait [00:10:29]:
Yeah. So that can actually break somebody. That can break a
Matt Jones [00:10:33]:
business. Actually. It was more 50 k, and I'd after that, I was like, not Chuck. Yeah.
Kathi Tait [00:10:38]:
Yeah. So really, really important that if there's any variations or anything outside your original agreement to get it in writing, an e even an email trail with the right person, you know, your project manager, whoever the person is that can approve the work, you need to have that in writing. And if they in your contract, if they require evidence for the variations, make sure that you take note of what that evidence is and be careful to collect it. We've put a whole, giant process in place now with this, client to make sure that if it happens again, we won't get stuck. So it'll be in your contract what you've gotta do for variations, and often it's super, fiddly. It's like photos, and and you've gotta have proof of every little thing and why, to who asked you to do it and when it was done. And so it can be it can be really, really complicated, but it's super important or you won't get paid. Like, there are builders out there that don't they don't give a shit about you.
Kathi Tait [00:11:48]:
They only care that their stuff's done and that they make a profit.
Matt Jones [00:11:52]:
Yeah. They're not builders anyway, they're all lawyers and contract this and contract that. Yeah. But, like the but you say it's complicated. Truthfully, there's so many, Like, great tools now for these things that make it quite simple. Even most of the job management project management tools, you know, out there have some Built in, components to them which enable you to document variations. Well, that's a good that's a
Kathi Tait [00:12:18]:
good point because I have found that a lot of my tradies are very adverse to technology. Even getting Not
Matt Jones [00:12:27]:
the ones that are listening to this podcast.
Kathi Tait [00:12:29]:
Well, I hope not. But even sometimes getting receipts can be difficult level on getting them to use a project management app. But you're right. I think that We need to use technology to our advantage. And if there's an app out there that will make your life easier, you know, put the bit of time in to learn it because it'll pay dividends, especially in a situation like this where it helps you get paid.
Matt Jones [00:12:53]:
100%. And if that is you guys, like, I reckon recommend you go reach out to our friends over at Tradipad, because they do a really good job with that. Like, they'll help you deploy the tech you need for the, For that sort of stuff, it it's awesome. But, I mean, look, there's no excuse for it. Like, you've gotta do it. And, yes, builders will always give you the runaround because at the end of the day, if they don't sign or approve something, then they cannot pay it. Yeah.
Kathi Tait [00:13:18]:
Yeah. Very I'm not
Matt Jones [00:13:20]:
trying to paint with
Kathi Tait [00:13:20]:
it, you
Matt Jones [00:13:21]:
know, with a tire brush here, of course, But, like, this is it it happens. It really does. It's and truthfully, it's not so much the smaller guys. It's normally the the bigger building companies that are they're they're not builders. They're lawyers Isn't there?
Kathi Tait [00:13:32]:
I'd agree with that. Yes.
Matt Jones [00:13:34]:
Contractors, and they're just like, but there's not a build on-site kind of thing.
Kathi Tait [00:13:37]:
Yeah. Yeah. For sure. This was one of the big, big builders that has done this to to us. So, yeah, I'd agree with that comment.
Matt Jones [00:13:46]:
Another Sadly, I think it's because of also, there's incentives in place for People in charge of these contract administrations to if they come on the budget, then they get a commission or they get some sort of incentive from it. So their Their incentive is actually to rip you off in a lot of times.
Kathi Tait [00:14:04]:
That's so shifty, isn't it?
Matt Jones [00:14:06]:
It's super shifty.
Kathi Tait [00:14:07]:
Yeah.
Matt Jones [00:14:08]:
Yeah.
Kathi Tait [00:14:08]:
So be careful who you work for. You know? The something I learned very early on in running a business in even in my industry was that you don't always want every client?
Matt Jones [00:14:21]:
No. A 100%. And I think, like, that is such an empower and this is a conversation also we have clients all the time because when they Typically come to us. Their main problem is that they're running off maybe word-of-mouth. So they have work and they have leads, but they don't have consistent leads. And what's empowering for them is when they actually start getting regular leads, it enables them to start being more picky and choosy with who they wanna work with. Because you can get a referral from someone, and you take that job because you have to when you got nothing in the pipeline. But when you got a whole bunch of leads coming in, you don't have to take it.
Kathi Tait [00:14:53]:
Yes. You can pick your most profitable jobs.
Matt Jones [00:14:56]:
Yeah.
Kathi Tait [00:14:56]:
I mean, and that's why we're here. We're here to make profit. Otherwise, you'd have a job. Right?
Matt Jones [00:15:02]:
Exactly. Yeah. Exactly.
Kathi Tait [00:15:03]:
Yeah. Absolutely.
Matt Jones [00:15:05]:
What do we get up to?
Kathi Tait [00:15:07]:
So, well, I haven't really gone in order, but that's okay. So I was gonna say, we're those big builders, here's a tip for the dealing with the big builders because, I I've used this, and I've saved a couple of people from bankruptcy using this tip. When when you are dealing with a big company, contact the accounts department and find out who processes your invoices. Get their name and make nice. Be nice. Make friends. Hello.
Matt Jones [00:15:42]:
Sure.
Kathi Tait [00:15:42]:
Tell them who you are. Introduce yourself. Find out. Some of them do, some of them don't, but some of them will have a special policy for small business to get paid faster. Now I found this in the mining industry that the big mining companies did this. So I don't know if the big builders do it or not, but it's worth asking the question. Find out the dates they do their payment runs. Typically, a big business will do 2 payment runs a month, and then that means that your invoices need to be in by a certain date to be in that pay run.
Kathi Tait [00:16:19]:
So if you can get those dates and schedule your invoicing so that you've got it in on time, according to how they run their accounts payable, then you're going to get paid more regularly because you're adhering to their system. So, basically, you're hacking their system to make sure that you can use it to your advantage.
Matt Jones [00:16:44]:
It's gonna be a lot harder to do when AI takes over and you're dealing with robots.
Kathi Tait [00:16:48]:
Well, that remains to be seen how how that's gonna go, isn't it? That's a whole a whole new conversation AI.
Matt Jones [00:16:57]:
I did do an interesting, 2 interesting podcasts, not so long ago, actually. Episode 369 with, Ken Brennan Mastering the art of contract negotiation and then in episode 379 with Brian Will, I did one which was called, how to negotiate like pro, but the essentially, what I learned in those in those episodes was that you do actually have negotiating opportunities, Power and more importantly, on obligation at the point of con at the at the contract level where you can They you are almost expected to be negotiating on the contracts that you're given, and a lot of people don't do it. A A lot of people just don't do it. They just get the contract and sign it without actually looking into things that can be negotiated. And some of those things Can be payment terms. They can be, LDs. They could be a lot of things like that. You know? So there's things that you do have a lot of power there, which most a lot of people sort of overlook.
Kathi Tait [00:18:00]:
Yeah. Well, if no one has taught you that, then how you should know, I guess, especially again if you're new. And that's another thing. Make sure that you've got your purchase orders quoted on your invoices. That's a super easy one to make sure you do because they'll reject it if they they don't have a purchase order on there. Is part of their you gotta understand that big businesses aren't like small businesses. They have these systems and procedures in place, and you need to follow them or things just don't happen. You'll get stuck in their system.
Kathi Tait [00:18:34]:
So it's smart to find out what that system is and, make sure that you're, you know the dates that you need to adhere to so that you can get paid.
Matt Jones [00:18:47]:
Oh, that's a good tip anyway. That wasn't in there, was it? Buttering up the
Kathi Tait [00:18:51]:
Oh, yeah. Yeah. I I said make nice. Make nice, introduce yourself, and ask if they have a policy in place for small business. Yeah. And I'd also say, to send statements every week. This is something that most people forget to do. So if you don't
Matt Jones [00:19:14]:
Like like financial statements?
Kathi Tait [00:19:17]:
No. No. No. A statement to your customer saying what they owe you. Yeah. You know? Your, accounts receivable statements. So often, you'll have more than 1 invoice in with somebody, especially if you're getting progress payments made, and you need to send statements to keep them on their toes. And part of their process will be checking those statements in making sure their system reflects what is on the statement.
Kathi Tait [00:19:45]:
And so if there's a discrepancy or something missing or something got stuck in their system, that will prompt them to reach out about it, getting that statement.
Matt Jones [00:19:59]:
Makes sense.
Kathi Tait [00:20:00]:
Yeah. It's a real simple one that just people don't don't really remember to do.
Matt Jones [00:20:05]:
Like, a lot of technology will automate that.
Kathi Tait [00:20:08]:
Yeah. Yeah. That some some software does automate it. You know, I guess The big thing is I see with the small to medium sized guys is they don't always have someone like me in place. Sometimes it's the wife, sometimes they're trying to do it themselves, or sometimes they just use a tax accountant and not someone in the middle. And so not all of these things get done regularly. Yep. And so there's also the option, in.
Kathi Tait [00:20:41]:
And I wouldn't say this for big builders, but for smaller residential type jobs, you could offer some sort of incentive to get paid upfront or to get paid cash. I think that the, the cash economy is still going strong with tradies, And, I think it's something that we should encourage because You're
Matt Jones [00:21:05]:
not alluding to not declaring, are you?
Kathi Tait [00:21:08]:
Oh, no. Not at all. But cash is king. There's no bank fees. There's there's, you know, you still record it as if it went into your bank, but, you know, if you can avoid all the fees that go with electronic processing, then maybe you can offer a discount to get paid faster. And is it not better to have the money in your pocket than it's sitting in your system and you're not gonna get paid for a month?
Matt Jones [00:21:39]:
Sure.
Kathi Tait [00:21:39]:
So sometimes it can be worth taking the discount or, to get that money faster. And, of course, that That probably depends on your cash flow situation as well. But, you know, when you're when you're shelling out for wages, cash flow can be a tricky thing to manage for a lot of people.
Matt Jones [00:22:01]:
Yeah. I'm not sure if I, Would agree with discounting, to be honest, on the like, getting
Kathi Tait [00:22:06]:
feedback on
Matt Jones [00:22:07]:
the front end. I've got a bit of
Kathi Tait [00:22:08]:
a hack for that because I recommend that we build in the
Matt Jones [00:22:12]:
same hack.
Kathi Tait [00:22:12]:
Build in an admin fee into your quoting. My concreter in South Australia, I've got him adding $500 into his bigger jobs for an admin fee. That admin fee can then be used to as a discount. So you're not losing anything off your actual job. You're just taking back from something you've built in. What what I have, I guess, what I I've learned over all the years of doing this is that Where we lose money is our time. It's it's like a time leakage because You underestimate how much time you're gonna spend on a job. And if you think about this, job itself being on the tools, supervising your team, or actually carrying out the job.
Kathi Tait [00:23:04]:
But then there's all the other stuff. You know? You've gotta order materials. You've gotta to your admin.
Matt Jones [00:23:11]:
You know Instagram.
Kathi Tait [00:23:14]:
Post your photos on your website. I don't know. But There's a lot of time outside the actual job that is used that people kind of forget about. And then there's the the time that you need to chase the money as well. Right? And if you've got a bad payer, that can be quite a natural amount of time. So I think that an an some sort of admin fee, build that into your quote is a good idea because that hovers a few hours of those extra time that you're going to spend. And, you don't have to itemize it. You can just lump it in there.
Kathi Tait [00:23:54]:
But but it also gives you a little bit to play with if you wanna do a discount or you wanna say, if you wanna pay me cash, mate, I'll knock 500 off.
Matt Jones [00:24:02]:
I mean, there's it's There's an insane amount of admin that does go into chasing up bills and, like, Like, even, like, our even with our business, like, we have it's seemingly, like, automated, you know, system, but still, like, chasing bills and stuff isn't Takes a lot of work. There's only moving hands involved. It's Right. It's crazy, you know.
Kathi Tait [00:24:24]:
So so is that not worth a discount to get the money now?
Matt Jones [00:24:28]:
Well, we don't discount for it, like, but we'll but there's an incentive. Like, we our price is our price, and if they don't wanna do it that way, then they pay more.
Kathi Tait [00:24:37]:
Okay. So you've gone the other way. Instead of discounting, you've gone
Matt Jones [00:24:40]:
Absolutely.
Kathi Tait [00:24:41]:
This is the price if you do this payment method, but if you wanna do this, it's gonna cost you. Yeah. That's fair.
Matt Jones [00:24:48]:
And in and in every and every every instance, it's, it still doesn't cover itself, To be honest, our aggregate, but it's like an incentive to follow the actual system.
Kathi Tait [00:24:59]:
Yeah. Yeah. For sure. Yeah. For sure. And, yeah, that mean that is the biggest thing, I think, because you just don't realize how much time is used up in these processes that are outside the jobs themselves. And, I often find too people who are grossly underestimating the amount of time even on the job. So now you probably don't have that so much because you've train your clients to do that properly.
Kathi Tait [00:25:32]:
But, again, for the newbies that, a a not experienced, then it's very easy to underestimate not only the time on the job, but then the time that it takes to do everything around that.
Matt Jones [00:25:48]:
Yeah. I mean, that's there's a lot of, You know, hourly calculator hourly rate calculators and stuff that you can get. Actually, I think, truthfully, there's a bunch on the website if you guys wanna go check it out in the resource Like, things that calculate as you can use to figure out what your true costs are because it all comes down to well, not always, but if you're in the reactive Business, like, those reactive sort of, sort of trade businesses, plumbers, you know, whatever it is, You know, you're typically you can only charge for billable hours. And so if you got a technician who's working 8 hours a day and he's only billing for 5, you know, you've gotta make up for that.
Kathi Tait [00:26:32]:
Yeah. I had a thought and I've lost it. But, yes, you're quite right. Yeah. So time overrun is a big one. And, oh, that's what I was gonna say. With with, our accounting, processes one of the things we do with our clients is we put all of the job cost stuff, the stuff that's directly related to the job in a section in your profit and loss called cost of sales. And so that means that when you're looking at your profit and loss statement, you can immediately see the expenses directly related to the jobs, how much they're costing you, and then what's left for your overheads.
Matt Jones [00:27:20]:
To work out the net profit based on that number straight up?
Kathi Tait [00:27:23]:
Right. Well, gross profit's that part and then the net profit's the end after your overhead. So to quickly explain the profit and loss for your newbies, it is basically your income less your expenses. But accounting, here's some accounting jargon. The cost of goods sold or cost of sales is a special expense category that we use at the top of the profit and loss. So you've got your income, and then you've got all the expenses that you have to spend in order to do the job. So this is things like materials, equipment hire, rubbish removal, and then direct wages for people working on the actual job. You cannot do the job without those things.
Kathi Tait [00:28:13]:
So they're your cost of sales. And so if you've got your revenue from your job and then you know what your Direct expenses for that job are, you know immediately if you're making a profit on that job, but then you've got to account for the overheads. And then overheads are things that we have to have in order to run a business, but not necessarily pertaining to that particular job. Things like your phones, your vehicles, your rent, your electricity, all those sort of things that we call them overheads. And so when you're costing out, it's important not only to include the direct job costs, but to also have an amount that covers the overheads. And so this is where cost accounting is super important. Now I don't know how much of this you do with your clients. But that's Well,
Matt Jones [00:29:06]:
I'm not a coach. I wouldn't do any of this.
Kathi Tait [00:29:07]:
Right.
Matt Jones [00:29:08]:
It's useful. So
Kathi Tait [00:29:09]:
Yeah. So that's my specialty. I'm actually a cost accountant, And so that's why I work at this side of with small business on a day to day basis right up until tax time, and then we hand over to a tax person because Kathy hates tax.
Matt Jones [00:29:25]:
Exciting, Kathy.
Kathi Tait [00:29:28]:
I can't stand tax, and I don't wanna borrow it. But we get, clients right to the point where the tax accountant can do their part, using really clean, figures so that they cost you less because we've done all that work for you. But the most important thing is that you're making a profit in each and every job. And how do you know that unless you do this exercise with, not only the direct costs, but charging back overheads too to make sure that you're covering those. Because, You know, like we said, the the time overrun is a huge one, but then you've got all these other overheads as well. And, you won't make a profit unless you take that into account.
Matt Jones [00:30:15]:
Yeah. I mean, I'm I think one of the best the best things for me because when we embrace the profit first system into the business, which gave us just transparency over all these different, you know, Departments, if you want, or financial departments within the business, like, as a financial model, I found I just found that such a simple way to cut through the, something that is Typically quite complex and complicated, and it's just sort of simplified it quite a lot for for a stupid plumber like me.
Kathi Tait [00:30:44]:
Well, I wouldn't say stupid because, you know, you've got all that plumbing jargon down.
Matt Jones [00:30:52]:
Don't patronize me, Cathy. I know what you're doing.
Kathi Tait [00:30:58]:
So that's it. There are hacks, policy to get deposits, and watch your payment terms. Make sure when you're dealing with a big company to find out what their processes are so you can hack their system. Either offer your discount or do what Matt does and make it more expensive if they want longer payment terms. Build in that admin fee. I really, really highly suggest that everyone does that. Send your weekly statements to your customers to make sure you're reminding them they owe you money, and, watch variations. Make sure you get everything in writing.
Kathi Tait [00:31:39]:
And I would add too, there's a little mindset to sort of tip to. Business owners are not banks. We're not required to give anybody credit. If I do something for you, I should be paid for that right now as as I've done it. Right? We're not required to give anybody credit. So that giving them payment terms is doing them a favor. Do not be afraid to chase money that you are owed. I see this a lot that people are shy about asking for their money, but they owe it to you.
Kathi Tait [00:32:14]:
You You you spent resources to do that job, and so you're fully within your rights to collect that money, and so never feel unsure about trying to collect money.
Matt Jones [00:32:29]:
Mhmm. Yeah. And these are definitely one of the things that I learned back in those podcast that you can negotiate some of these payment terms where it's like, oh, 90 days from the day of invoice. You're like like, it's ridiculous. It's like they expect you to just bankroll a building business because
Kathi Tait [00:32:46]:
I think even 30 days is daylight robbery, to be honest. Totally. Because Yeah. Especially with these big companies, you know, It's not your problem how big their job is. You need to be paid, and I would suggest trying to get weekly payment terms if you can. And if you can't do that, get fortnightly. But you should never be waiting a month.
Matt Jones [00:33:11]:
Yeah. Yeah. It does. I mean, there's I suppose there's negotiations that needs to happen there with But anyway, what I learned in those other podcast is that you can negotiate and you should. And so if there's something there that you do want removed, especially in the space of LDs and stuff like that, which is Sometimes completely unrealistic. Now you hear stories about paint is getting getting slapped for all days because the and but but the was not even put up. But because I didn't have them done the painting, they get hit, you know, like, it's just insane.
Kathi Tait [00:33:41]:
I have to say, out of all the tradies, I think painters have it pretty bad.
Matt Jones [00:33:48]:
So the last in, last out?
Kathi Tait [00:33:50]:
Well, yeah. And everybody mucks up their shit. Like, people lean lean stuff at lean doors against their walls, they scuff the skirtings, they muck stuff off putting cabinetry in. They, Like, the things that I've seen now over the last, I don't know, 4 years with my painter, and He's worked on some really big building contracts, and it's just outrageous what they expect of him. And he's like, what? You want me to paint your shit for free? Like, I'm in business here too, man. So, yeah, very interesting.
Matt Jones [00:34:27]:
Give them give them an inch. I'll take them all.
Kathi Tait [00:34:29]:
Yes. Yes. Absolutely.
Matt Jones [00:34:31]:
Well, anyway, I hope that helps you guys, in In getting paid before Christmas. A bit of extra spending dough for you to blow on the kitties. No doubt.
Kathi Tait [00:34:41]:
Yeah. No one wants to be broke at Christmas Any more than they're gonna be.
Matt Jones [00:34:48]:
Exactly. We almost feel like it's a given these days, but anyway Cool. Well, look, if you guys any if any of you guys, wanna get hold of Cathy, where's the best place to do it over the website?
Kathi Tait [00:34:59]:
Yep. Tradiebooks.au.
Matt Jones [00:35:01]:
Tradiebooks.au. And you are a tradie bookkeeping?
Kathi Tait [00:35:07]:
Bookkeeping, cost accounting, So we'll look after your bookkeeping, your compliance, and also make sure you make profit on every job.
Matt Jones [00:35:16]:
Nice. Love it. Alright. Well, thank you so much for your time. I believe we're gonna come back and have another conversation at some point in relation to the importance of the cash in the economy. Correct?
Kathi Tait [00:35:28]:
Yeah. I think there's some hidden dangers to losing cash, and I'd really like to talk to your audience about that, make them aware.
Matt Jones [00:35:36]:
You did touch on it on our last episode, and since then, as I mentioned offline, I've been carrying around a $50 note, which I haven't broken because it's just so easy to beat my watch. But, Yeah. I'll be keen to have that do that podcast because,
Kathi Tait [00:35:49]:
I just
Matt Jones [00:35:50]:
feel like it. Yeah. It's definitely trending towards, A cashless sort of environment, isn't it?
Kathi Tait [00:35:56]:
Yeah. And I think there's some hidden dangers that we need to be aware of. You know? It it's very convenient being able to just beep at your phone at a terminal, but there are some hidden dangers that I do wanna talk to your audience about. So I'm keen to do that soon.
Matt Jones [00:36:15]:
Cool. Alright. Well, thanks again for your time. And Few listeners and viewers out there, if you wanna get a hold of Kathy, I'll have some links within the show notes. So head across there to site share.com and search Kathy with a k, K a t h I, and then you this episode will pop up along with any others or the other one that you have done. Cool. Alright. That's a wrap.
Kathi Tait [00:36:36]:
Great. Thanks, Matt.
Matt Jones [00:36:37]:
Thanks for tuning in, guys. I hope you enjoyed that podcast. Please, if you did, head across to Itunes and leave us a review. We would very much appreciate that. Anyway, if you are a project based trade business and you work in solar or bathroom renovations or kitchen renovations or roofing or Something along those lines. And you would like to see some of the results that we've been showcasing in our marketing on for your business, thousands of percent return on ad spend, 2000, 3000, 5000, 7000, 13,000% return on ad spend. Please head across to tradie.wikiforward/pod for podcast. That's tradie.wikiforward/pod for podcast.
Matt Jones [00:37:14]:
It will be well worth the conversation, and I can't wait to chat with you.