Author Topic: THE CURSE OF OVERTRADING  (Read 1771 times)

Alan Sargent

  • Full Member
  • ***
  • Posts: 129
« on: March 27, 2014, 09:48:36 pm »
The winter rains will soon give way to a glorious Spring (?) and our clients will quickly forget the reason for delays in starting/completing projects, expecting you to arrive on/return to site and complete the garden before the summer. They do not want to understand that you have many other customers with the same thoughts and wishes!

Obviously, all contractors are going to have to meet their obligations as best they can, and will (hopefully) have kept in close touch with their clients and updated them on potential works progress. It will prove to be a very difficult time for many, especially if some jobs were partially finished or nearing completion, as finances will be more readily available from those near completions. Similarly, mobilisation payments will have been paid, yet little sign of any work as yet due to the weather, and those clients will also become very demanding.

I have called this article ‘Overtrading’, perhaps unfairly in this particular instance, as we have no control over the weather, but all too often in the past year I have seen contractors take on far more work than their existing team can handle, hoping to catch up on previous years low sales, or make some money from the resurgence in enquiries/acceptances. Yet the net result is the same. Too much work, too many acceptances and too little labour – or ready cash available, having suffered a time of heavy losses on wages during the winter – to be able to trade efficiently. Too many unpaid suppliers and taxes, new equipment urgently needed and all to be funded by contracts drawn up when money was easier, with no overdraft fees to find.

Mobilisation payments have been used up simply on paying old bills and keeping the staff wages paid, yet the money must be found to make the purchases for which they were originally paid.

I would urge caution over the next few months. Be careful of taking on more work, just because you need the cash injection that new mobilisation payments will bring. Take a long, hard look at the reality of your situation, and try to work through your difficulties, using your existing work force, plus perhaps some trusted sub - contractors (the last thing you want is to take on staff that may be poached by others just when you desperately need their help) who understand your dilemma and will work to help you through this particular patch.

Check carefully through your contract documents. If you have a fully detailed and itemised works schedule, you should have made clear and precise notes on conditions that prevailed at the time of quoting, and that status quo recorded in your tender. An example of this would be soil, and the use/re-use of existing topsoil within the project. If the original soil is no longer useable, this will be an identifiable ‘extra’ and earn new money. (Export/import)
If a hedge was to be cut last autumn, and has since grown another foot on all three sides, the cost will be higher. The winter months produced some extraordinary weather. This is not your fault, and you should not have to suffer additional costs!

Carry out an audit of finances available and required, projects status and potential start dates, client ‘condition’ (chasing/shouting/understanding), materials available, credit status with suppliers, labour situation etc, and plan a Spring Campaign to get you over the next few months.