May 15, 2015
"We Live In A World Of What Is...Not What Should Be" - Randalism
I am going to talk to you about a "Scammer" that could be draining cash and profits out of your construction company. It is the onslaught of "Cheap Bookkeeping Services" with an emphasis on Cheap!
Contractor Bookkeeping Services Menu:
| Good | Fast | Cheap |
You Can Only Choose Two
In the beginning, it appears to good to be true almost as if the contractor has found the impossible combination of Good+Fast+Cheap! After a short while, they re-discover the laws of business are still working and they are getting exactly what they paid for! They have engaged a bookkeeping service with data entry clerks trying to be bookkeepers! People who bless their hearts are not even close to being regular bookkeepers, let alone construction bookkeepers, which is completely different from regular bookkeeping as a shovel is from a backhoe! Learn More...
The idea that anyone can get something for nothing is only true in fairy tales where "Scammers" live which is what I say when someone is bs’ing me, but I’m being polite ;)
Contractors are "Producers" who live in the real world, earn a decent living and build retirement nest eggs and streams of passive income.
Over the last few years, I've heard some pretty bold “Scammers” describe how they provide outsourced bookkeeping services for less than anyone else. Here are the three biggest lies:
1."Bookkeeping Services $5.00 And Hour"
2."30 day free trial"
3."We will assign a dedicated bookkeeper to your account"
These lies (and all the others out there) are so insidious because the laws of business operate in the real world and you get what you pay for:
Lie #1 Accounting skill is a must and nobody with any bookkeeping skill is going to work for $5.00 an hour
Lie #2 The 30 day free trial means you invest enormous amounts of time and energy getting your account setup
Lie #3 A dedicated bookkeeper is a code word that means
I hate these lies, because they set good solid contractors up to fail. Then we have to spend ages debunking them when contractors come to us with broken business and shattered dreams...
That's not what I want for any contractor; and definitely not for you because part of our mission is to help you achieve what you set out to do when you first opened your construction company.
Owning and operating a contracting company is not easy; however, if you know what to do, know your numbers and advertise you can become very wealthy and amass a small fortune of money that will work hard to make you more money with passive streams of income.
Outsourced bookkeeping services an online business is definitely easier and cheaper than it ever has been, but that doesn't make it easy, and it doesn't make it free.
These days, contractors are under increased pressure to cut their prices to get enough work. And that means they need to reduce costs. New technologies and new approaches in cloud computing for construction accounting gives forward thinking contractors an amazing ability to get more for less - but in most cases, contractor's heads are still stuck in 1990, thinking they have to do everything themselves.
In addition, a lot of in-house bookkeepers are a part of the problem, fighting back hard at the thought of letting any jobs or control goes to someone else.
Let’s Review This
First, separate in your mind the concept of outsourcing contractor bookkeeping services and jobs because they are not the same thing. For example, suppose you decide to upgrade your contractor bookkeeping software from shoeboxes full of receipts or spreadsheets to a computer based construction accounting software like QuickBooks.
You can pay your bookkeeper to spend days or weeks trying to figure out how to setup QuickBooks for your construction company and in the end wonder why you don't have the Financial and Job Costing Reports you need to operate and grow your company, or you can outsource that task to someone who does it hundreds of times a year and add a few hours of tutoring for your in-house bookkeeper.
The result will be a QuickBooks file for construction that is designed to work the way you do and has a lot of memorized transactions, customized reports and accounts preset to handle things like:
·QuickBooks Setup For Construction Company
·Sales Tax Returns
·Payroll Tax Returns, 941 and 940
·Free Stand Alone Invoice For Contractors
·Standard Invoicing Service
·Work In Progress (WIP) Reporting
·Retention Tracking System
·Insurance Audit Reports
·Job Cost Reports
·Five Key Performance Indicator Reports for monitoring your business
There Is A Huge Difference Between Construction Accounting And Regular Accounting
Construction Accounting is built on a foundation of regular accounting and shares the same basic financial reports for operating and growing a business and preparing annual tax returns and some very rudimentary management decisions. Construction accounting adds many complex layers of reporting mechanisms to show you, the contractor, where your best customers are within psychographic and geographic market segmentation boundaries using the 80/20 rule.
The 80/20 Rule Can Make You A Lot Of Money!
·20% of your customers normally generate 80% of your net profit.
·20% of the goods or services you sell contribute 80% of your revenue
·20% or 2 out of 10 of your staff create 80% of the value for your customers.
The frightening consequence of the 80/20 rule is that 8 out of 10 hours we spend at work drive almost no value to the bottom line and the biggest drain is trying to save money doing our own contractor bookkeeping instead of reviewing the Key Performance Indicator (KPI) Reports. Through our contractors bookkeeping services system you can access them 24/7 without opening QuickBooks for Contractors.
The most important value good bookkeeping brings to a business is an understanding of where your 20% is hidden.
By generating daily reports that uncover the best customers, jobs, services, or products, you will soon see how you can refocus your internal efforts on doing more good work.
This is the great contribution a company receives from good QuickBooks® data and from using QuickBooks® the ‘right-way’.
This is a short list of the Chart of Accounts commonly used for construction accounting and regular accounting. The list is intentionally short in order to make the point without being completely overwhelming.
Construction Account = 233 Vs. Regular Accounting Titles = 115
So we’re not talking about jobs. When I say, “outsource your contractors bookkeeping” I do not mean turn it all over to us or any other contractors bookkeeping service because this is a something that never seems to work out well. No, I’m talking about outsourcing specific bookkeeping services related to data entry, bills, payroll processing and preparing Quarterly Tax Returns.
NEVER, EVER let an outsider pay the bills, print checks and authorize payment for payroll or any tax payments. It is crucial your keep control of your money. In fact outsourcing contractors bookkeeping is one of the ways to avoid bookkeeper embezzlement
My suggestion is to look at every part of your internal contractor bookkeeping service and ask yourself a simple question: is this a unique and critical part of our construction company and is it something that only we do? If so, it stays in-house, and needs the brightest minds you have working on it. If not, it is a candidate for outsourcing, and you need to look at it more closely.
I’m not suggesting “automatically outsource it,” because the decision isn’t that simple. This first question is just the starting point.
For example, bank and credit card account reconciliations in QuickBooks are what help maintain the accuracy and integrity of your Financial and Job Costing Reports. If you have two of each you are probably paying someone at least two hours a month to reconcile them. That person might make $15 dollars an hour and by the time you add overhead for labor burden they cost your construction company $25.29 an hour X 2 hours = $50.58 a month just to reconcile the bank and credit card statements. Unless they use Journal Entries to save time and destroy any hope of job costing reports.
Fully Burdened Bookkeeper Cost
Simply means what it will cost you to hire someone including the company portion of the payroll taxes and all those little costs that only an accountant like me would think about. The example below shows a part-time in-house bookkeeper at $15.00 an hour working 10 hours a week. Notice this poor soul does not have any benefits at all and they still cost the company $25.29 per hour!
These costs do not include heavy training for your bookkeeper; read The Nine Steps for more
The two happiest days in a construction company owner's life is the day he hires a bookkeeper and the day he outsources his bookkeeping.
Generally speaking we know from our research a typical contractor with 2-4 employees and annual sales of $500,000 will need at least a part-time bookkeeper for 10 hours a week and they will try to get away with only paying them $15.00 an hour plus overhead and it will cost their construction company approximately $13,000 - $15,000 a year and most of the time they will still overpay their taxes, have bad or non-existent financial and Job Costing Reports.
But you’d still need an in-house bookkeeper, right? Well… perhaps not. See, outsourcing is often interesting in that, while you still need administrative resources, they can be less skilled. They don’t need to have any contractors bookkeeping service skills to pick up the mail, make bank deposits, print checks, which can be done on your local computer even with QuickBooks Desktop version in the cloud. It’s likely a part-time office assistant could do that in addition to other duties and errands.
Point is, it is worth asking the question what are the things you and your employees should be dealing with that nobody else can do for you. Everything else - contractors bookkeeping services, cell phones, power, land lines for office phones, coffee service, janitorial services should be outsourced if possible, and if it makes sense. Not because it’s cheaper, although outsourcing often works out that way in a careful comparison. No, you do it because it removes distractions, so that everyone in your construction company can focus on what’s important to acquiring customers and satisfying their needs which puts money in your pocket.
It’s an interesting approach. The only reason more contractors haven’t started down this road is because most construction companies are poorly managed, which means they all kind of level out against each other. But, many contractors are figuring it out and wishing they had started years ago.
General Contractor, Lynnwood Washington Review:
"The beginning of 2008 my company attempted to save money by doing our own accounting, but instead paperwork started piling up, wasn't organized and wasn't getting done. I failed to realize the amount of time and effort that went into accounting, especially not being an accountant by trade.
I didn't want to have my wife take on the burden being a stay-at-home home and already having her hands full with 2 kids so I made the decision to go back with Randal and Sharie. I am a new, young business owner and have sought much help from them and have always gotten great advice and great help.
They know the trade, and they know what I'm going through on a daily basis. I have not regretted my decision one bit. They have helped me to get back on track and get my business running smooth again. I am grateful for the services they offer.
I would recommend their services to any General Contractor."
I trust this podcast helps you understand that outsourcing your contractors bookkeeping services to us is about more than just “doing the bookkeeping”; it is about taking holistic approach to your entire construction company and helping support you as a contractor and as a person.
We understand the good, bad and the ugly about owning and operating construction companies because we have had several of them and we sincerely care about you and your construction company!
That is all I have for now and if you have listened this far please do me the honor of commenting and rating podcast www.FastEasyAccounting.com/podcast Tell me what you liked, did not like, tell it as you see it because your feedback is crucial and I thank you in advance.
I trust this will be of value to you and your feedback is always welcome at www.FastEasyAccounting.com/podcast
This is one more example of how Fast Easy Accounting is helping construction company owners across the USA including Alaska and Hawaii put more money in the bank to operate and grow your construction company. Construction accounting is not rocket science; it is a lot harder than that and a lot more valuable to construction contractors like you so stop missing out and call Sharie 206-361-3950 or email firstname.lastname@example.org
Thinking About Outsourcing Your Contractors Bookkeeping Services?
Click On The Link Below:
Need Help Now?
Call Sharie 206-361-3950
In closing, I want to caution you that we may or may not be a good fit for your contracting company. This guide will help you learn what to look for in outsourced construction accounting.
Thank you very much and I hope you understand
we really do care about you and all contractors regardless of
whether or not you ever hire our services.
Bye for now until our next episode here on the Contractors Success MAP Podcast.
Randal DeHart | Contractors Accountant