In this industry, everyone’s trying to book more moves and load more trucks. But what if you were losing money on every move you did? Would it still make sense to load more trucks? How would you even know if this was the case? How would you fix it?
These are the kinds of questions that your financial statements can help answer. But before you start sleuthing through statements searching for answers to your business's biggest questions, you really need to understand the basics of finance.
One of the themes that appeared in our State of Moving and Storage report was the need for greater financial literacy among movers. Very often, folks in this industry have deep expertise in moving because they’ve come up through the ranks, from working as movers and drivers to being owners. But it can be all too easy to get swept up in the day-to-day craziness of running a moving company and end up neglecting your own financial knowledge– sometimes to the detriment of the financial health of your company.
At Supermove, one of our big goals is to help fill gaps in knowledge in the moving industry. So with that in mind, we’ve launched a new webinar series: The 101 Series for Movers. This will explore basic topics that all movers should know, in a series of webinars! Fittingly, our first ever 101 series was Finance 101 for Movers.
Joining us for this inaugural session was Dave Finger, CPA, a CFO Industry Leader for Transportation & Logistics with CLA LLP, and the Fractional CFO of Matt’s Moving. He took us through the financial basics that every owner needs to know, and illustrated with some great deep dives into example financial statements.
Is a dollar of cost saved the same as a dollar of revenue generated?
Dave started with some of the basics of accounting, as well as a great icebreaker question: Is a dollar saved the same as a dollar of revenue?
The answer is no, and Dave uses this question to illustrate what you can take away from your financial statements on a monthly basis. He points out that it’s important to understand what’s actually going to have a bigger impact on your bottom line. If you increase sales, you have costs associated with that– fuel, labor, etc. But if you can make a dollar without turning a tire, that’s a far more risk-free way to grow.
Users and uses of financial information
Next, Dave went over who the main users are of financial information, as well as what each segment looks for from this info:
Owners and/or Investors: Use financial statements to value the business and make investment decisions, i.e. buy, sell, or invest more into the business
Management: Uses statements to guide decisions about operating the business including hiring decisions, vendor selection, service pricing, lines of business to pursue, and capital investment decisions (ie. buying or selling trucks).
Banks, Equipment Finance Companies, and other Creditors
Government reporting, i.e. taxes and licensing
How often should you look at financial statements?
During the seminar, Dave pointed out that with moving softwarelike Supermove, you’ve got real-time information that can be downloaded to accounting systems like QuickBooks Online, but overall that information isn’t complete until the end of the month. So generally speaking, you should be looking at your financials on a monthly basis.
There are some key indicators that you can look at weekly, and even things like sales dashboard that you can look at daily to help your team focus, but for the most part monthly is the best.
What are the main components of a financial statement?
Dave spent the bulk of the seminar diving into the key pieces of a financial statement– the balance sheet, income statement, and cash flow statement.
Balance sheet: Shows assets, liabilities, and equity
Your balance sheet is a snapshot of your company’s financial performance at a specific point in time. This is a key piece for communicating how your business is doing (this is important when you go to the bank for a loan, for instance), and gives you an at-a-glance view of your financial performance.
Check out this short video of Dave’s explanation of how to read and structure a balance sheet.
Income statement: Revenues - Expenses = Net Income (or Loss)
Your income statement shows how much you made over a period of time. This is the statement that answers the question of whether to focus on revenue or costs, and it can also give you a more nuanced picture of things like pricing.
Your income statement will help guide you on what you should be charging for your services. Say the economy slows down or competition in your area increases, and you want to drop prices to be more competitive– it’s essential that you understand how low you can set your rates and still make money.
“If you're not covering your variable costs on a move you're better off parking your equipment,” says Dave.
The income statement can also help you give guidance to your sales and marketing people on where they need to focus, and it can help you make proactive, strategic, educated decisions to move the business forward. But, Dave cautions that this kind of insight only comes with timely financial information in an accessible format.
Cash flow statement
Your cash flow statement starts with either net income or loss and explains what happened to your cash during that period. It basically shows the exchange of money between you, customers, and vendors so you can understand the various levers available to you to manage cash flow.
Dave points out that when it comes to cash flow, receivables collection is a really key area to focus on.
“What I’ve seen through the years is receivable collection activity is the thing that gets the most neglected in an accounting and finance department. You really need to make sure you stay on top of that because your cash can erode quickly when it's sitting there in your receivables. So if you want to be a better business manager, put time and emphasis into collecting your receivables– it's that important.”
Which financial statement is the most important for movers?
Dave says that there’s no single financial statement that is most important for moving companies, however, there are statements that become more essential depending on your growth phase.
If you’re a small business, your cash flow statement is probably the hardest to put together but it’s also the most important, since your company needs cash to operate and your margins are probably pretty tight. That cash flow statement also lets you forecast, look ahead and plan for your next phase of growth.
As you grow and your cash flow stabilizes, then it shifts to the income statement– at this phase, you need to have a strong view of how much money you’re bringing in. Finally, your balance sheet becomes very important for bigger companies to understand if you’re building equity and creating something sustainable.
Should you have an internal or outsourced finance team?
We wrapped up the seminar with a quick discussion of the merits of outsourcing some of the more advanced financial roles in a company. Dave acknowledges that senior finance roles like Controller and CFO are expensive, and smaller companies might not have the funds or the need for a full-time person in these positions. This is where outsourcing can be extremely helpful. Organizations like CLA can help small orgs identify key business metrics, budget, and forecast, perform trend analysis, run risk management and strategic tax planning, etc.
We’d be remiss if we didn’t give a little plug for Supermove here! Between seamless payments processing with Supermove Payments, integrations with QuickBooks Online, and a dedicated accounting tab, the software is an essential tool for moving companies looking to get on top of their finances and grow.