Jan 2, 2015
We Are QuickBooks Experts Specializing In Construction
New Contractor's Have horrendous Levels of Stress
Did You Quit Your Job - And start your own construction company
only to discover you need a contractor’s license and bond. Suddenly
you realize it costs real money? Now that can be stressful!
Did You Ask A Friend Or Relative - To loan you some start-up
capital and they agreed on condition you become equal partners in
your construction company. The idea was you would do all the work
they would get half the profits and you politely refused, or not?
This is getting very stressful
Did You Go To Your Bank - And they offered to give you a line of
credit. They don't want to be partners they just want everything
you own used for collateral. You say O.K. and then find out the
interest rate is 24% (more or less) and they can call the loan due
if you ever miss a payment and take everything you own?. This is
getting extremely stressful
Did You Use Your Personal Credit Cards - And supplier accounts to
finance your new business and perhaps you were not careful about
what you bought?
What To Do Next - You have never run a business. The only thing you
know is your old boss was a terrible business manager and anyone
could do better than that! But now that you are the boss you don't
know where to start NOW THAT'S EXTREMELY PAINFUL STRESS!
Are You Spending Time To Set Up - Your construction company
properly so that it will save you grief, time, money and pay you
dividends in the future? Or are you "Winging It"?
Are You Taking Steps To Protect Yourself - With a Subchapter S-Corp
(Sub S) to help protect your business and personal assets?
Get Organized - We strongly recommend a Subchapter S-Corp for tax
advantages, protecting your personal assets in the event of a claim
or lawsuit against your company and for future expansion. Consult
with a construction attorney and follow their advice.
Tax Advantages For LLC or a Sub S - If you do not setup your
corporation correctly the profit or loss from your business will be
passed through to the owners as normal income. Since the LLC or Sub
S does not pay state or federal income tax (as separate business
entities), you may be able to save money over a Sole
Proprietorship; eliminate double taxation.
Partnerships Are The Only Ships - Designed to sink. We recommend
stay away from them like the plague.
Construction Bookkeeping Service - That understands construction is
best when you start because they can setup QuickBooks correctly in
the beginning for your construction company and take care of the
accounting until you are ready to take over.
Bank Accounts - Set up two bank accounts in your company name. All
large income and expenses go through one account and keep the debit
card in your personal safe. The second bank account is for your
debit card you keep in your wallet and has no more than $500 or
whatever you need for small purchases during the week.
Never Ever Co-Mingle - Personal and business money or you could
lose the tax benefits and personal protection of your
corporation.
Put Money In And Take Money Out - Of your business is O.K. if it is
done correctly. Your bookkeeping service can advise you on how to
do it so that it is recorded in QuickBooks properly.
Understand When A Transaction Is Income - And when it is not
income
Insurance - Is critical to your construction company. General
Liability and Auto/rental equipment insurance can help protect you
and your company against claims for personal injury and property
damage, and may provide you with legal defense of those claims.
Talk to an insurance agent that understands construction about your
insurance needs.
Architectural or Engineering Designs - Similar services are good
reason to get Professional Liability (Errors and Omissions)
insurance to help protect you and your company from claims arising
out of mistakes in designs and calculations.
Contractor's Licenses - Information changes rapidly so check online
for your local county or contact us and we can help 206-361-3950 or
email sharie@fasteasyaccounting.com.
Performance Bonds - If you are doing public sector work, you will
probably be required to provide a performance bond to ensure that
you complete the work in accordance with terms of the contract.
Bonds or guarantees are provided by surety companies. Getting your
construction company qualified is a process because the surety
company will go through a due diligence process on your company to
determine how much money they will write or guarantee for your
bonds.
Business Planning And Strategy Development - Is the blueprint for
your business to succeed. You get out of them what you put into
them. Garbage In = Garbage Out! Your business plan is a living
breathing document that you will change and update as needed. It
provides the baseline and milestones for your business and lets you
make decisions in advance in the calm environment of your office
instead of "on the fly" while driving, talking on your cell, eating
lunch, and putting together a bid. It is a must have to borrow
money from a bank.
Paperwork - Begin the habit of putting all paperwork into manila
envelopes which you write the job name on both sides in big letter.
If you are thinking of doing your own construction bookkeeping
think again, your time is more valuable in managing your business,
getting customers and keeping them happy. Let us take care of your
construction accounting.
Estimating Process - There is no one right answer. You can develop
your own estimating and pricing process or use a software
estimating program like UDA.
Contracts - We recommend seeking the advice of a qualified
construction attorney to put together a contract that fits your
specific needs. Your contracts need a well-defined scope of work,
clear payment terms, a reasonable schedule and a good change order
clause. No work should ever be performed based on verbal
agreements. Get everything in writing, always, no exceptions!
Invoicing - For small projects we have a Free Invoice Template you
can download and for larger projects with multiple deposits, change
orders, progress payments check out our Pay Application.
Do Not Offer Financing - Your customer or client's project by
providing a substantial amounts of labor, material, subcontractors
and rental equipment hoping to get paid later on down the road.
Follow McDonald's restaurant model: Step #1 Customer places order,
Step #2 Customer pays, Step #3 Customer gets food. I have owned and
operated several construction businesses and have clients who do it
now and always work on "Other People's Money (O.P.M.). Nothing will
kill your business and your hopes and dreams faster than running
out of money.
Marketing | Accounting | Production M.A.P. - Is a process that
never stops. Selling convinces your customer or client to buy your
construction services and it comes after the marketing step.
Knowing how to write proposals for customers or respond to a
request for proposal (RFQ). What makes your company different than
the competition? What are your construction company's Strengths,
Weaknesses, Opportunities and Threats? Perform a SWOT Analysis.
Never ever bad-mouth your competition; it's temping but
unprofessional and they might actually do a better job than you
do.
Join Trade Organizations - This is a great place to meet new
customers and get lots of referrals because construction is deep
and wide and no company does it all. The best one we have found is
The Master Builders Association. And spend time learning about
Networking For Contractors. This organization is good for all
construction and related industries.
Labor - Can include yourself in the beginning, construction
workers, subcontractors and labor pools like Madden Industrial
Contractors. Subcontractors are specialty trade contractors that
you can delegate certain portions of the work you intend to
perform. Make sure they have appropriate experience, properly
licensed, bonded and insured. It is important in order to maintain
future long term relationships that pay dividend to pay your
subcontractors on time and treat them well.
Employees - Bring lots of flexibility and responsibility. Flexible
because you can allocate resources as need and scheduling is in
your direct control. Responsibility because someone has too process
payroll and the payroll tax returns. You need to manage cash flow
to have money for their wages, benefits you offer and any
applicable state and federal withholding taxes related to their
wages, such as Social Security, income tax withholding, workers
Compensation and unemployment insurance. In addition you may be
responsible for employee benefits such as vacation pay, health
insurance, and contributions to a retirement program. With labor
Pools they take care of all of that and you pay a fixed cost per
hour or whatever you negotiate with the service. Check with your
construction attorney and your liability insurance agent to make
certain you are covered.
Lesson #01 - A new contractor meets an experienced customer and
money changes hands and not the way you expect it
The Contract Screwing - This is typical of what happens when you
first get started. You bid on a project and you are the low bidder.
You are given the client's standard contract, which contains the
client's favorite set of commercial terms and conditions, to sign
as a condition of getting the project. You close your and sign the
contract because you don't want to ask for changes in the terms or
consult your construction attorney. You put the signed contract in
your bottom desk drawer and pray hard nothing will happen during
the course of the project that will cause you to ever have to read
the contract again.
That Is Not What Happens This Is What Usually Happens:
Poorly defined scopes of work create claims and disputes.
The completion schedule is too short and exposes you to monetary
damages for failure to finish on time.
Payment terms put you in never ending negative cash flow by loaning
the customer money at 0% and borrowing on your credit cards at
24%
The customer keeps 5% to 10% of the contract price as retention for
up a year or more after the entire project is finished which could
be all your profit in the project.
Indemnity clauses could make you financially responsible for bodily
injury and property damage claims caused by customer
negligence.
Indemnity clauses could make you pay the customer's attorney fees
and costs.
Your insurance company may be required to provide additional
insured coverage for the project giving the customer free insurance
and full access to the policy coverage and limits.
Oftentimes the term and coverage of the warranty is beyond normal
industry standards.
Dispute resolution clauses that require arbitration first and then
litigation, probably the two worst ways ever invented to resolve
disputes.
The client's pre-printed final waiver of lien document (necessary
for contractor to receive final payment) waives all contractor's
rights to recover unpaid extra work and to pursue any claims that
arose during the course of the project.
Your Construction Attorney - Is your friend and ally and can save
you a lot of grief. Most contracts are easy to read and
understand.
Scope of Work - Description in the contract is of key importance
and a well-defined scope of work with details that outlines
specific work to be performed by you, the contractor. The
scope of work needs to also define work that is excluded and all
work to be done by others, including the owner, which may interface
with the contractor's scope of work. Never worry about too much
detail; that detail will significantly help with the avoidance or
resolution of claims and disputes that may arise out of the scope
of work.
Schedule And Gantt Chart - Make sure you have enough time in the
schedule to perform the scope of work. This is where every minute
spent developing your Work-Breakdown-Structure (WBS) is worth an
hour or more in time needed to do the work.
Add Contingency To Your Schedule - Minor delays, weather,
equipment problems, etc. always happen and do not expect the
customer to be sympathetic and allow more time for delays. This is
extremely important if the contract has liquidated money penalty
damages for late completion.
Payment Terms - Should need to add positive cash flow. Get cash
coming in early and often. Paid when paid and paid if paid terms
are ridiculous and we recommend not signing them ever! Clients who
want these types of payment terms all have access to plenty of
money and can pay you. Remember cash is king!
Retention - Instead of retention being withheld from your progress
payment invoices consider providing a warranty guaranty instead but
check with your construction attorney first!
Indemnities - Can be an open door to your cash reserves and
everything you own, be careful! Indemnities typically cover claims
for bodily injury, death of persons and property damage. The broad
and intermediate form indemnities may require you to pay for bodily
injury, death and property damage claims caused by the client, and
you could be liable for the customer's attorney's fees and costs.
Indemnity in contracts can be a dangerous risk transfer if enforced
in a court of law could possibly bankrupt your company for
something you didn't do. Again your construction attorney is the
person to ask and don't be afraid to walk away from a project.
Three types of indemnities:
Broad Form: A broad form indemnity contractually obligates
you, the contractor, to be responsible for claims arising out of
any amount of the client's negligence, including his sole
negligence. The 100% indemnity.
Intermediate Form: An intermediate form indemnity
contractually obligates you, the contractor, to be responsible for
claims arising out of the client's negligence, excluding only those
claims arising out of the client's sole negligence. The 99.9%
indemnity.
Limited Form: A limited form indemnity contractually
obligates both the contractor and the client to be responsible only
to the extent they are negligent for a claim.
Additionally Insured - Is a typical requirement in a contract that
means something like: "Contractor will name customer as an
additional insured on his General Liability Insurance policy."
Understand that when you name your customer as an additional
insured to your general liability insurance policy (bodily injury
and property damage coverage) he receives full access to the policy
monetary limits and coverage provided by the policy at no cost,
FREE, $0.00! The customer may also receive the legal defense of a
claim because your general liability policy for FREE!
Warranty - Is a good thing because it shows your commitment to
stand behind your work and fix or replace defective parts or
workmanship. Standing behind your work with a good warranty will
give you a very good reputation. However, warranties don't have to
go on forever and you don't need to marry the project, one year is
about right and perhaps you could offer extended warranties as
well. Your warranty should exclude things like normal wear and
tear, corrosion, improper usage, etc. Make sure your warranty
is specific as to what it includes and excludes, when it starts and
when it ends.
Dispute Resolution- Well defined and documented dispute resolution
clause in all your contracts that outlines the process to try and
resolve disputes with negotiation as the starting place and if
negotiation fails, then mediation. If that will not work provide
for a senior executive in each organization to try and resolve the
dispute. If all else fails arbitration and/or litigation is the end
and both parties will lose.
Lien Waiver - Do not ever give a lien waiver in advance of the
check clearing the bank. All 50 states have lien laws that provide
contractors with some limited protection against customers that
refuse to pay. Make sure your construction attorney reviews the
original contract looking for the customer's final lien wavier that
could be hidden deep in the contract documents. Some final lien
waivers also waive your rights to collect outstanding change orders
and/or bodily injury or property damage claims against your
employees or property caused by the negligence of the customer so
be careful.
Board Of Advisors - Finally one of the best things you can do at
very little cost is put together your own Board of Advisors to help
guide you.
Finally Find A Mentor - Someone who has been were you want to go
and can guide you. We would like to be that person for you. Fill
out the form on the right or call Sharie 206-361-3950 or email
sharie@fasteasyaccounting.com and schedule your no charge one-hour
consultation
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.
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.
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