- August 7, 2020
- Posted by: Dan Gordon
- Category: Accounting Advice, How PCO Bookkeepers Helps You Grow
How PCO Bookkeepers Improves Cash Flow Management and Profitability
We Provide You the Visibility you Need and The Ability to Leverage Your Routing Software to Impact 8 Critical Profitability Ratios
When it comes to the health of any business, managing cash flow effectively is absolutely essential for both survival and success. You have probably heard the statistic that 82% of small businesses fail due to poor cash flow management. So how does your small business avoid becoming a part of the statistic? We believe because we specialize in the pest control industry we can help many owners improve their cash flow management and significantly improve profitability.
We Provide You the Cash Flow Visibility
The key to both cash flow and financial success for any small business, and especially any business with seasonal fluctuations, starts with concrete monthly financial reports. These statements include:
– Profit and Loss Snapshot
– Detailed Profit and Loss Statement
– Liquidity Snapshot
This level of visibility is just the first step. As part of our CFO and Accounting Services we also provide additional dashboards and reports that give you the insights you need to drill into the details that impact your cash flow.
– The Rule of 23 Dashboard – To ensure your managers, divisions and/or business units are hitting profitability margins and growth targets
– Trend Lines – To compare year-over-year performance so you’re alerted to issues
– Actuals to Budgets with Variances – To ensure you’re hitting required operational, sales and customer retention targets
– Customized KPIs – To ensure you’re hitting competitive industry benchmarks required for success
Quick Demo of Monthly Dashboard and Benchmark Reports
PCO Bookkeepers Provides Customized Monthly Reporting, Goal, and Competitive Dashboard Reporting Based on Industry Best Practices
8 Critical Profitability Ratios
Once we help you understand how and when money flows into and out of your business throughout the year, we are then uniquely qualified to help you understand and impact your future. This includes:
– Helping you to reduce costs
– Staying on top of invoicing and collections
– Helping you make smarter investments in your business
– Helping you maximize your sales and marketing efforts
What makes us unique is our expertise in two areas:
Software Optimization – We integrate QuickBooks with your routing software data.
Industry Benchmarks – Our clients represent $600 million in annualized pest revenue. This allows us to anonymously combine data so you can understand industry best practices.
This optimization of technology and benchmark data can turn these ratios into a pest control business owner’s best friend because it allows us to pull out the revenue data and correlate it with operational data by almost any category, so you can understand specifically:
– What your critical profitability ratios are
– How to impact them with tactical, operational improvements
These ratios include:
Days Sales in Account Receivable (A/R) – This ratio lets you know if your customers are sticking to the credit terms that you extend; this offers better insight into the health of your receivables than simply measuring A/R aging. It allows you to see if you are collecting on a timely basis and identifies your best and worst customers.
Revenue Per Employee – Usually what you’ll see is that if you’re improving as a business, the revenue per employee tends to increase year over year.
Revenue Per Technician – This is a primary number to focus on. It’s used to determine if technician pay is reasonable compared to production. It can be used to see if pricing is reasonable and to determine route efficiency. Typically, this number should be above $180,000 annually, though we do have clients who are in the $300,000 range. Most are slightly over $200,000.
Revenue Per Customer – This is calculated for regularly scheduled service. This ratio is useful because you can use it as a baseline to edge up annual profitability. For example, this year we have quarterlies that we offer at $100 dollars a quarter, so therefore it’s a $400 per year revenue per customer. If it’s not in sync with the revenue per technician, we can decide that we want to simply raise prices by $5 and that lifts profit. Alternatively, it may make sense to add a new service. Incremental strategic decisions usually net big returns.
Office to Production – Office staff to production staff. This compares your CSRs and people in the office to total number of field people. The reason we say field people is because sometimes you have on-the-road salespeople and those would be considered field people. This ratio is useful because nothing decreases profit more than unneeded labor.
Skip Percentage – Skip means someone calls and says, “Hey don’t service me this month, but I’ll take my next service.” If you sell annualized pest control performed quarterly and billed monthly you are disassociating the service with the money paid, so if somebody skips, who cares? But from an operations perspective, you do care. Is the customer at risk for canceling? Are you completing work that you set out to complete? Will you lose revenue at the end of the year? According to our benchmarks, you are at risk if your skip percentage is greater than 1.5% per month.
Cancel Percentage – The total number of customers who stopped service this month over total number of customers before the month starts. The ratio is extremely useful because it measures retention, the quality of your sales and if your technicians are well-trained. Are they stopping because they’re getting poor service or are they stopping for other reasons? If they are stopping for other reasons – why?
Tech Utilization or Route Efficiency – The single most important key performance indicator to determine profitability. Let’s say that I have a technician who’s punched in for eight hours and six of those hours he’s on the job at people’s homes or businesses treating, and two hours he’s behind the windshield. In this case he is at 75% efficiency. If in this case he is able to do 10 stops at $100/stop, that is $1000 in revenue. If we are able to up that to 90% efficiency he could do 12 stops for $1,200. That would be a $4,000 increase per month – almost $50,000 per year. Even a slight increase has a profound impact on annualized gross revenue and net profits.
Eight Key Profitability Ratios On-Demand Webcast
Here is an educational webcast of the eight critical ratios you can impact to increase your profitability.
PCO Bookkeepers provides you with all the cost savings and peace of mind of an accounting firm, but because of our specialization in the pest control industry we provide exponential value to any pest control company. Two of the ways we do this are:
– Visibility into your profit and cash flow
– The ability to impact operational areas to improve that cash flow
Our reports are designed with the pest control business owner or manager in mind. They can be fully customized to fit your pest control company needs and show how you measure up against other pest control businesses in the industry.
Whether you are trying to manage a rapidly expanding business, trying to protect your profit or looking for new ways to grow a pest control business, we can help. We are obsessed with providing pest control companies the information they need to grow in today’s competitive environment. PCO Bookkeepers deploys a unique approach to managing a pest control company for growth.
We help you configure your company for success, focusing on developing and maintaining healthy, accurate operational systems that enable your business to grow. You only pay for what you need, and we offer a full range of solutions to ensure the right fit for your business. These solutions include:
– Accounting, Booking and CFO Services
– Accounts Payable
– Tax Preparation and Planning
– Brokerage Services and Mergers & Acquisition Support