How's your company doing? If you're like most contractors, your answer to that question is based on how sales are faring, how much work's been produced, and how those numbers compare with budget projections. But how do you get to the point where you know all those numbers?
Larry Weinberg, president of BOWA Builders in McLean, Va., says that even with accounting statements received 10 days after the end of the month, "we were still trying to steer a ship looking out the back."
So six months ago, BOWA Builders began using a system the company calls "critical numbers." Critical numbers include accounts payable, accounts receivable, work in the sales pipeline (all jobs and contracts the company has received money for), and work in the production pipeline (actual jobs under way and their status, schedule-wise). Also included are future sales (projects that are either at the design stage or waiting to be designed), plus leads.
The company's team of six executives meets weekly to report the numbers and analyze them. They also discuss critical numbers during a daily conference call just before lunch. The idea, says Weinberg, is to "begin developing ratios and numbers that are more proactive in telling us where the company is."
Weinberg says close tracking and analysis allows the company's managers to make decisions based on data rather than a hunch. "When you track these every week, you get a sense of the trends."
