Let’s Use the Tools
Prue Younger, CEO Message
More so than any time of the year there are probably many of you renewing and negotiating contracts. Whether you have robust models, systems or a very good accountant it is important that you have a strong understanding of what your business is costing, as it makes sense then to understand how far you can go with your negotiations.
There are many tools out there to help and just recently the old LIRO costing model – Business Management for Logging Handbook (BMOL) was worked on extensively by our partner accountant Blackburne Group – accolades to the work that Mark and Craig did on this project. This initiative was supported through funding from the Forest Growers Levy Trust which was a good message as forest growers want to see their contractors well equipped with business knowledge.
The LIRO costing programme was last published in 2009 and was actively promoted through FICA work-shops and many copies of the workbook and costing disc were sold. Pulling out a very old version in black and white off the shelf, was testament that the BMOL Handbook has realistically not been used or promoted by FICA as a useful tool. The world has moved on in expecting everything to be online or app format and FICA agreed it was time to make the costing programme and handbook more user-friendly and available to the industry.
It needed to be made much more relevant and usable, so a review of both content and delivery in converting to an online format was carried out and we have now made it available through the FICA website and equally being able to share it with other organisations. The revised format will enable easy updates to recognise future changes in industry requirements.
Content has been enhanced in some areas and streamlined in others as with the considerable developments in H & S. The presentation is simplified not attempting to replicate much of the detailed content but instead providing appropriate direct links to more detailed relevant sources e.g. Safetree.
Similarly, regarding environmental standards, referencing to appropriate sources and NES guidelines would appear appropriate. The preceding would streamline the handbook and enable more focus on direct business issues. In that regard there have been very significant updates regarding reporting tools e.g. online accounting packages such as Xero and cash planning models. Reporting on these changes, options available and costs would undoubtedly be beneficial to many in the industry. Meanwhile, updating the other content to be relevant to current circumstances.
Feeding into your costs you need to be aware of changes in your general expenses like fuel and how, over the last few months, a steady drop in the price of fuel has cross-credited the additional cost of high equipment investment. Even aspects such as bank loan rates dropping significantly over this last 12 months can give you the confidence to make better informed decisions around investment of new equipment. These are all good reasons to review your business, use the tools available.
Also available are Forme Consulting Group’s annual Informe Daily Rate Estimate reports for Engineering, Forestry and Harvesting equipment and crews https://forme.co.nz/services/informe/
A new addition to the reports this year is the introduction of an initial labour rate survey of harvesting and forestry positions through FICA contractors and building these results into Forme’s labour rate models. Forme is looking to widen the labour rate survey through FICA within the next few months – watch this space.
The other space for support and financial modelling is the finance companies. I really applaud the support our partnering finance companies like Crediflex, UDC and Finance NZ gave during COVID-19 as they were out there advising you all and their focus was to see the industry continue business with lesser challenges. With contractors that are aptly equipped with credible business costings, they are more likely to be sustainable through challenging times of market variations.
Finally, another exciting project being supported by Worksafe, is a project this year around building a model contract that will provide a template to be used as base foundations. From the onset a win-win for all parties will be the focus. The benefit will be to see a more sustainable industry with some acknowledgment of good business practices.
The offer of tools for contractors to use and support their businesses and ensure their sustainability for the future of the industry, will support a profes-sional sector that will, in turn, be available for the long term. I know it takes time to get to even open these tools up and it’s even harder to consistently use them, but it will save you time in the long term and give you some space to increase your bottom line. Check out our BMOL on the front page of our website – give it a go! www.fica.org.nz