Les Hanks your Business Coach Finance Guru Shares the must knows about finance:
Let’s face it, plumbing and HVAC contractors are not accountants, and the good news is they do not need to be. However, if you own your business, you must understand how to analyze the profit and loss statement and balance sheet you receive from your accountant each month. Many contractors ignore their balance sheets, but several very important financial ratios that measure the health of your company are on the balance sheet.
You MUST know your cost structure, your cash deposits to breakeven + profit sales needed, and the impact of changes on your financial position. Keep in mind the cost structure for determining your breakeven requires your COGS accounts to be in the right place on your P&L. Items like technician pay, materials, payroll for techs, tech fuel, sub-contractor costs, and tools or equipment to create revenue all belong on your P&L as a direct cost. This is the starting place for correct and comprehensive analysis.
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