Nov 7, 2014
This Podcast Is Episode Number 0084 And It Will Be About How High Profit Small Contractors Fund Working Capital With OPM
Construction Working Capital - Definitions are complex and can take a lot of room to explain and since we are primarily concerned about helping small construction companies like yours to make a lot of money I will keep it simple and easy.
Construction Companies Need Short-Term Liquid Working Capital such as cash, lines of credit, loans, owner financing, credit cards, supplier accounts and other forms of money to conduct daily operations.
Small Construction Companies With Annual Sales Less Than $10,000,000 and other requirements enjoy some benefits that are not always available to larger firms. Likewise, larger firms can leverage economies of scale
The Larger Your Construction Company - grows the more likely you could end up operating like a bank without the hundreds of ways to generate revenues from fee income and interest calculation that banks use.
The Most Popular Method - Which was designed by investors and developers and shrewd business people who understand the concept of divide and conquer is for contractors to get little or no down payment for a construction project, do all the work, including change orders and then try to collect their money.
What Often Happens - Is that contractor’s hate paperwork preferring to keep everything in their head. Then when it comes time to collect their money they find themselves having to re-sell the job and talk their customer into parting with their money. It is similar to the old bartender joke.
No Deposits And Progress Payments? - Man Goes Into A Bar: "Hey bartender, hurry up and pour me a double before the trouble starts" and the bartender does. The man drinks it. The man repeats the scenario several times and soon the bartender says "Hey there have been a number of drinks crossing the bar and no money coming back" to which the man replies "Uh-oh! The trouble is about to start!" This is similar to a contractor who does a lot of work without getting deposits and progress payments.
Its Been Said: "The value of services rapidly diminish after the services have been performed" which is why highly profitable companies like McDonalds gets your money before they deliver your meal. Compare the success and profitability of a McDonalds franchise to most restaurants.
The Least Popular Method - Is getting work orders and contracts signed and deposit checks before starting the project because most of us were conditioned from childhood through adulthood and beyond not to ask for money.
Contracts With Clear Simple Language - All Change Orders will be documented with a scope of work and be Paid In Advance before the work begins. Again we recommend you hire a good construction attorney and have that person write your contracts.
Contractors That Finance - Working capital with their own money and whatever they can borrow will earn less profit and put themselves at higher risk of failure than contractors who use Other People's Money (O.P.M.). It is a given that to start your construction business you need working capital and we have formulas that can work with you to estimate how much you will need and assist you the calculations in our Business Plan section.
To see an example of how it works go to www.fasteasyaccounting.com/opm
In The Example
Shown - There are two fictional contractors that
started at the same time and each one had $10,000 working capital
between cash in the bank, room on their credit cards and supplier
accounts.
There Are
Risks - In doing this the most important is
understanding the money you have from your customers and clients
that has not been used to perform work is a liability to the
company and needs to be reflected properly in your bookkeeping
system and you should never use any unearned dollars to buy
anything frivolous like a new F-350 Pickup truck or a vacation.
Bookkeeper Theft - Is another risk to be aware of because Bad Bookkeepers and Incompetent Bookkeepers have been known to re-distribute your wealth if they believe you are earning too much money.
We Have No Issue - With contractors earning lots and lots of money. Our bookkeeping system is setup so that we NEVER HAVE ACCESS TO YOUR MONEY. We simply do your bookkeeping.
Your Construction Accountant - Is a valuable key component in setting up QuickBooks to help you keep track of it all. And as needed we can help with ongoing bookkeeping services and Strategic Management Process Development.
I hope 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.
We Remove Contractor's Unique Paperwork Frustrations
For Construction Company Owners who do not need the full power of QuickBooks for contractors and want 24/7 online access we offer Xero Accounting Online and we have custom setup for construction companies.
I hope 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.
You Deserve To Be Wealthy, Because You Bring Value To Other People's Lives!
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 sharie@fasteasyaccounting.com
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.
Warm Regards,
Randal DeHart | Contractors Accountant