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If cashflow concerns are keeping you up at night – you’re not alone.
Right now, builders around the country are staring down the barrel of major price hikes. Having just returned to business as usual after enduring a global pandemic, it’s fast become clear that the storm for builders is far from over.
Now, the building industry is a resilient one. But the cascade of tier-one construction firms that have become insolvent in the last few months shows us that even the major players aren’t safe from the crippling costs. To ensure your business survives and thrives through the price hike chaos, you need a plan.
And that’s why our people are here.
We sat down with our Audit and Forensic Accounting Partner, Bernard Whebell, to share his insights on how builders can overcome ballooning costs and dwindling material supply.
With 30 years of experience in helping businesses and their owners thrive through uncertain times, Bernard knows a thing or two about traversing the financial hurdles Aussie builders are currently facing.
These are his tips for creating business certainty in uncertain times.
Know your incomings and outgoings
“The first step is making sure you know your numbers, and know them well,” says Bernard.
“It’s tempting to bury your head in the sand and hope it all goes away.
But the reality is that businesses live and die by their numbers”
According to Bernard, knowing exactly the incoming and outgoing figures will enable you to know exactly where you are in your business cycle.
And until you know exactly where you are right now, it’s impossible to plan where you want to be and how you’re going to get there.
It’s easier to prevent than to cure. So if reviewing your incomings and outgoings gives you a shock – this is a good thing. Because now that you’re aware there’s a problem, you can work on solving it.
Factor price shocks into your quotes
The soaring cost of materials combined with the building industry’s fixed-price contracts has been a costly combination for builders.
With prices rising on everything from screws, timber, tiles, and tradies, some builders have reported going out of pocket by $40,000 to complete house builds. Others have paid an even bigger price – with ASIC’s latest data showing a 38% insolvency increase within the construction sector.
“Every industry experiences challenges. A big part of making it through these challenging times is being prepared for the unexpected,” says Bernard.
“It’s important to plan for price changes, supply issues, and the other shifts that could destabilise the foundational elements of your business”
To financially prepare your business for the unexpected, we recommend factoring price shocks into your fixed price quoting methodology.
By considering price shocks in your quotation formula, you can protect your client, yourself, and your business from the financial strain of skyrocketing costs of goods and services.
Stay compliant, always
The Queensland Building and Construction Commission (QBCC) remains an important pillar for the industry. Understanding and meeting your compliance responsibilities in terms of current ratio and net tangible assets will help you avoid unnecessary strain during an already turbulent time.
“We know cash coming in is better than cash going out. But to ensure those tangible numbers stay healthy, your regulatory numbers and QBCC compliance numbers need to be in check too,” says Bernard.
Partner with the people who put you first
When you’re steering your business and finances through uncertain times, you need the support of people who will take the time to understand exactly who you are and how your business works.
At Ulton, we tailor finance and business strategies around what matters to you. By putting you at the centre of our service, we support you with practical solutions for managing the building industry’s current challenges and equip you with the tools to mitigate future risks.
Like us, we know there are a lot of people concerned about what's happening in the industry right now. And it's times like this when time is of the essence. With the supply chain issues, labour shortages and surging costs of raw materials, it's no wonder builders are feeling the pressure.
If you are reading this article and feeling overwhelmed and need someone to help see you through, contact us today. We will sit down with you and work through your business concerns. We're here to help.
Crisis support is available from Lifeline on 13 11 14.
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