We work with many businesses in the building and construction industry and now more than ever builders and contractors are feeling the financial pressure which can sometimes lead to jeopardising their QBCC licence and ability to operate into the future.
The QBCC financial requirements for licencing are strict and the new mandatory annual reporting will mean that licensees with poor finances can no longer go unnoticed. With the deadline for mandatory reporting for all licensees in Category 3 and below, fast approaching at 31 December 2019, it is causing a lot of shake up for licensees who are only now coming to terms with not meeting the financial tests.
We are getting lots of enquiry from builders and contractors whose Accountants don’t understand the QBCC financial requirements and are not guiding them with practical solutions to improve their financial position to meet the financial ratios.
All in all, the most common issues we see amongst licensees are:
- Licensees firstly not understanding the financial ratios and how their everyday management decisions impact their ability to maintain their licence from a financial perspective. We find that once educated around their numbers, owners are empowered to make good decisions to ensure they continue to meet financial requirements, but unless their Accountant or Financial Advisor sits down and provides practical tips and educates them, licensees are running blind.
- Directors/owners withdrawing cash from the business to fund their personal lifestyle, meaning insufficient cash left in the business entity to help support the ‘current asset ratio’. Unlike businesses in other industries who can run their cashflow lean, licencing requirements of the building and construction industry mean that cash reserves need to be maintained to meet one of the financial requirements.
- Getting behind in Tax Office and Employee Superannuation Guarantee payments. When cashflow gets tight, the ATO and Employee Superannuation are often the two payments that get missed and businesses fall behind on. If you feel cashflow pressure, instead of allowing your business to fall behind in ATO payments, sit down with your Accountant to establish what has gone wrong and how to fix the problem immediately. Once the business has significant ATO and Employee Superannuation debt it becomes increasingly difficult to ever meet the QBCC financial ratios.
Our best advice is to stay informed, review your financials regularly and if you aren’t sure how to do this reach out to your financial advisor for assistance. Being proactive and putting measures in place early is the best solution, rather than submitting financials to the QBCC showing you don’t meet the tests and waiting for them to take the next steps towards cancellation. We specialise in accounting and business advice for the building and construction industry, if you need assistance, we welcome you to contact our office.