But 221 companies were reportedly liquidated in the 12 months to March 30 as a result of being unable to pay their bills, largely due to the length of time they had to wait for payment from customers. So what is happening in these companies? Is it finance that's let them down? Bad workmanship? In my experience, the most common pitfalls builders and tradies face are the following.
Not knowing your worth. A lot of builders I see undercharge or don't charge for their work appropriately.
This can especially be the case in housing/building contracts in group housing. Most likely you are paid by the square metre so check your rates and see what others are paying and getting for their contracts. Pay attention to the detail to see what the fine print includes that you need to provide. Little things such as nails and mileage add up.
Not getting progress payments to help cashflow. I've seen a few tradies enter into contracts and not bother to work on a progress payment schedule. If you're hiring staff to complete a contract, not receiving payments will eat away at your cashflow.
Covering overheads and planning for profit. Most of the time a business does well to make sure they're making a buck to cover materials and labour costs.
But what about the business' overheads and profit? Make sure you plan ahead to work out what you need to bring in, you may be surprised at the amount of extra you need to find to pay for business operations such as tools and compliance costs.
Lack of business experience. The quickest way to get some help is seek support from the outset. You may be a qualified and competent tradesperson but if you're new to business then there's a lot to learn. Make sure you have close support from your accountant or a mentor.
Jeremy Tauri is an associate at Plus Chartered Accountants
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
If we had to sum up Brent and the team at Plus CA it would be - humorous, efficient, professional with a real focus on making your money work to its best ability for you...we will continue to deal with them even though we are moving overseas as we know they have our best interests at heart.
Jeremy thank you for your patience, assistance and general chit chat over the years. I would have absolutely no issue in recommending your services to everyone and anyone – in fact, I do.
We recently employed Jeremy Tauri of Plus Chartered Accountants and have been thrilled with the improved service we have received. Jeremy is really approachable and always available to answer queries. At his instigation we have set up quarterly meetings so that we are regularly reviewing our business and avoiding any ‘end of year surprises’.