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JANUARY 2014 issue of
Rental Management

Utilizing dashboard reports
01/03/2014

Get to know your business better

After traveling the U.S. and Canada and viewing or analyzing more than 3,000 rental companies I’ve created a “dashboard reports”
system that profitable rental companies, both large and small, use religiously and regularly.

The operators of well-run and profitable rental companies do not cut corners. They measure their businesses on a daily, weekly, monthly and annual basis. These measurements and “metrics” guide them in decision-making, help improve their financial well-being and ultimately increase the value of their businesses.

Well-run and profitable rental companies around the country know their “dashboards” and therefore know where they stand at any given time. They also know the direction they are headed. It is second nature to the owners and managers of these rental companies. It should be for you and your company as well.

These reports will add clarity to critical financial aspects of your business and will assist you in managing your rental company
more effectively.

First and foremost, a well-run rental company should be able to internally generate detailed monthly financial statements that are available to company management and ownership by the 10th of every month, but no later than the 15th. The best-run and most profitable rental companies never rely solely on quarterly reports and certainly not just on annual reports.

Most, if not all, of the companies I see and consult with that do not generate monthly statements have not reached their potential. The most profitable rental companies — both party and equipment rental — utilize daily, weekly, monthly and annual reports in a timely manner, understand them and are guided by them. Anything beyond the 15th of the month becomes “stale data.” A key to managing your rental business and using your dashboard is to recognize certain “signals” or “warnings” and take action in a timely manner to correct them. Fresh data is a must.

I encourage clients to develop concise and consistent dashboard reports, so that their managers and employees can analyze and manage their businesses more effectively and therefore more profitably.

These reports usually come directly from a company’s software system — a rental-specific and useful, reliable system — or the reports can be compiled and summarized using Excel. These dashboard reports should be saved, archived and available for reference at any time in the future. These reports also will be useful for valuation purposes and for the due diligence process should you sell your company to an outside, third party.

A daily “Dashboard Report,” preferably in a hard-copy format that you can reference at a moment’s notice, includes:

  • Cash balance.
  • Accounts receivable balance.
  • Accounts receivable days sales outstanding (DSO).
  • Accounts receivable balance over 60 days. This should include 90 and 120 days+ categories.
  • Accounts payable balance.
  • Customer deposits balance.
  • Yesterday’s daily revenue.
  • Month-to-date revenue through close of the prior business day.
  • Advance bookings (for special event rental companies). This should include a balance of this month, next month and total.

The rental business is fluid. It changes day by day, hour by hour, minute by minute. Did a major account go over 60 days today? Did it go over 90 or 120 days? It might be time to take action now with a phone call directly from the owner to the proper person at this account or perhaps a lunch meeting to discuss things. Whatever the case may be, daily reports are an important component on your dashboard. Your average DSO should be 60 days or less.

A weekly “Dashboard Report” should include:

  • Cash balance.
  • Accounts receivable balance.
  • Accounts receivable days sales outstanding (DSO).
  • Accounts receivable balance over 60 days, including 90 and 120+ days categories.
  • Accounts payable balance.
  • Customer deposits balance.
  • Advance bookings (special event rental companies), including balance of this month, next month and total.
  • Current week’s revenue. All revenue amounts should be “broken out” or divided into categories, such as rental, re-rent/sub-rent revenue, damage waiver, delivery, sales of merchandise, labor and “other.”
  • Last week’s revenue.
  • Current month-to-date revenue.
  • Last month-to-date revenue for same time period.
  • Current month-to-date revenue for previous year for same time period.
  • Last month’s total revenue.
  • Current month total revenues (full month) for previous year.
  • Year-to-date total revenues for current year.
  • Year-to-date total revenues for same time period of the prior year.
  • Weekly payroll expense, including base pay, overtime, bonus, taxes, contract labor and any other payroll expenses.
  • Weekly payroll expense as a percentage of total weekly revenue.

The weekly component to your dashboard is very important. Bookings or forecasts from your salesman can be way up and temporary personnel or more equipment might be needed in the near future. How does the cash balance look? Is payroll in line? Does a change in head count make sense? What is the comparison up to this point regarding revenues for the same period last year?

Look at year-to-date and month-to-date versus last year. What is the explanation for the changes, good or bad? A shoulder shrug won’t cut it. I recommend monitoring payroll on this weekly indicator and make decisions according to short-term and long-term forecasts. Don’t let emotion get in the way of sound business decisions regarding personnel.

A monthly “Dashboard Report” should include:

  • Total revenue for the month with all revenue amounts “broken out” or divided into categories such rental, re-rent/sub rent revenue, damage waiver, delivery, sales of equipment, sales of merchandise, labor and “other.”
  • Previous month’s total revenue (broken out).
  • Year-to-date total revenues for current year (broken out).
  • Year-to-date total revenues for same time period of prior year (broken out).
  • Advance bookings (current, as of previous end of month and for same period last year).
  • Payroll expense as a percentage of revenue for the month and year-to-date.
  • Total rental inventory calculated at original cost.
  • Dollar utilization or “currency/financial utilization” of owned rental inventory as a percentage of rental revenue, annualized based on current month and trailing 12 months excluding re-rent revenue.
  • Capital expenditures, actual to date and planned total for the year, no matter if it is expensed or capitalized.
  • Adjusted EBITDA for the month, also stated as percentage of total revenue for the month.
  • Adjusted EBITDA last month.
  • Adjusted EBITDA for current month last year.
  • Adjusted EBITDA year-to-date.
  • Adjusted EBITDA year-to-date for last year.

This is the obvious culmination of your daily and weekly reports and is vital. How is your currency utilization this month compared to last month and the same month a year ago? Are you re-renting more equipment? Should you purchase that equipment or is it a one-time type of rental or something that doesn’t fit into your fleet mix and therefore better to re-rent? What is most affecting your EBITDA change?

Compare expense line items. Payroll always is big. How do repairs and maintenance expenses look compared to the same period year-to-date last year versus this year? You can add that to your dashboard. Sometimes your dashboard will tell you to “step on the gas.” Other times it will tell you to pull over, pop the hood and make some adjustments immediately. Once you develop these reports, it becomes habit to look for and effectively manage critical components of your business via its dashboard.

Well-run and profitable rental companies don’t do everything right, but they put in the effort and work smart. They know and utilize their dashboard reports in order to run their companies at a high level.

There are other reports and variations used to manage rental companies, but this is one way to start and a solid way to view, analyze, know and manage your business. By utilizing dashboard reports, you will know your business better than ever. RM

 

Fred Hageman is the principal of Rental Acquisitions, Cameron Park, Calif., a professional mergers and acquisitions and valuation firm specializing in the equipment and special event rental industry. He can be reached at 530-672-1885 or fjhageman@aol.com. More information is available online at rentalacquisitions.com.

 

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