Jun 9, 2017
Almost every Contractor understands how to do basic repairs and remodels on a house.
As the project grows it gets a little more complicated.
Is it a kitchen remodel, a bath remodel, upgrading the laundry
area? Building a Deck?
Adding a second story addition? Adding a garage?
Your Construction Accounting System started small and easy. Perhaps
you tracked everything with bank statements and Excel sheets and it
worked fine for a while.
Later as your Construction Company grew and you began to wonder
where you are making and losing money (Job Costing) and you realized you need to
better understand Construction Job Cash Flow you purchased
QuickBooks thinking it was "Quick" and that is when the trouble
started...
Each type of project takes
planning and skill.
Doing a teardown and then building a new house? Oh, maybe the
zoning does not allow for a new house so technically it is a major
remodel keeping a certain amount of square footage of the original
house.
A brand-new contractor without a background in larger projects
typically is not going to immediately jump into a large
remodel. Someone who has done lots of remodels may not be
comfortable building a new house from the ground up.
Decisions in any project are what level of quality of the work, how
much detail, the size and the material needed to complete the job
Decides How Much It Costs. Is a Cottage or a Mansion?
The area of the country makes a difference. For Example, a $500,000
house in one part of the country could be a two story, 4 bedrooms,
2.5 baths and a wraparound porch. In another part of the country,
it may be a 3-bedroom rambler and a carport.
The cost of material may not be a lot cheaper in one area over
another. The price of sheetrock and lumber increased in Seattle
after Hurricane Sandy and Hurricane Katrina. Local labor may be
different.
The skillset needs to complete the Handyman Repair, Installation of
Plumbing, Heating, Electrical, Roofs, building the Additions on a
House, creating a whole house remodel or building a new house are
not the same as being able to track all of the expenses and do all
of the bookkeeping properly.
Construction Accounting and
Regular Accounting require entirely different skill
sets.
With an Excel Spreadsheet, quite a lot can be done to know your
costs and track the bills that need to be paid. Many contractors
have done this for years. Turning in the spreadsheet and a pile of
paperwork to the Tax Accountant to file the annual taxes.
If the Tax Accountant has worked with you for years; they
understand your method and figure out a workaround. Some will
setup QuickBooks Desktop or some other software to create monthly,
quarterly numbers leading them to the annual Profit & Loss and
Balance Sheet needed to file your annual taxes
Your Banker is not quite so willing to do “try to figure out” your
financials. They have a limited amount of time to make a
presentation to a Loan Committee. Financial Statements from
QuickBooks make it easy for your Banker and the Loan Committee to
compare financial statements between applicants.
Some contractors have the benefit of being in a small town, where
their banker has known them for years. The decision process is more
informal. As Bank Regulators have gotten involved with the
decision process – what was a simple “Yes” decision may suddenly be
“No”. A lot of Home Builders got caught up in that loop and lost
property because could neither sell or refinance.
Are you counting on “The Kindness of Others” (to quote slightly
from a classic movie) for solutions to your lack of good
bookkeeping? Sometimes it is harder to avoid doing something than
it would be to find a qualified “Construction Bookkeeper” to do the
Bookkeeping for your Construction Company.
Here is my parental side showing. Many times our kids would spend
more time avoiding their homework, cleaning up their rooms, doing
chores and explaining “Why It Wasn’t Done” or “Why They Shouldn’t
Have To Do It” In many cases more time was spent explaining than it
would have taken to do it.
As Construction Accountants, we understand there are “Too Many
Tasks” and not enough time in the day. This is “Why we develop
processes, procedures, use Software and app’s” to make it as easy
as possible for our clients.
As Contractors, it is not that you can’t do it but is it the
“Highest And Best Use of Your Time” Wow – I’m positive you can
enter in fuel slips into QuickBooks.
Might be a better use of your time talking to a prospect, looking
at a job, creating an estimate, writing up the invoice, or
collecting The Money, going to the Bank to deposit the Money,
paying your insurance, cleaning your truck and even sleeping.
The Basics in our world is the Five Key Performance Indicators plus Job
Costing. Sometimes a contractor is so busy trying to get super
detailed that they miss the basics. I make recommendations on what
I call Sharie’s Cash Management 101 – Get the Money. Think about
the Five Key Performance Indicators like the dials
on your truck dashboard.
Washington State it is a
sales tax driven state, is your state the same
way?
One issue Contractors discover is that Sales Tax is due at the time
of purchase unless they have a Reseller Permit (issued by the State
of Washington) Sales tax reports are due monthly, quarterly or
annually. Some items purchased is considered “Consumables” –
Suppliers have the exact list.
If a purchase is made on April 1st with sales tax paid to the
source (supplier) and if the Tax Return is paid Quarterly – it is
due on July 31st, therefore, sales tax was paid months earlier than
necessary.
· This impacts cash flow.
· Failing to Get Job Deposits.
· Failing to outline payment schedule with the
client on larger projects.
· (Paid Weekly, Bi-Weekly or by Milestone of the
job).
· Failing to send the “Notice
To The Owner” and relying on the “Notice To The Owner by their
Material Supplier” This is helpful but only to the amount of the
material bill.
· Failing to get Signed Change Orders.
· Customers versus Clients remember the deducts
and have memory loss on the increases.
Construction Bookkeeping is more than Balancing the Check Book
(which is important)
Receiving actual bills from your subcontractors. Have you set a
schedule on “How and When” you are paying subcontractors? Is it
tied to the same schedule you are billing your client?
Money In and Money
Out.
Just because you have money in the bank from the last project does
not mean you should delay or ignore billing on your current
projects. Remember you have outstanding liabilities coming.
Here is what is coming: Material Suppliers on 30-day
accounts, Credit Card payment for purchases paid for, Payroll
Liabilities, Sales Tax Liabilities, Worker’s Compensation,
Liability Insurance, Vehicle Insurance.
Bigger costs like Vehicle Repairs, Down Payment on a newer
vehicle.
That marketing budget for business cards, flyers, online
advertising, upgrading or updating your website. Adding GPS
tracking, software, and your Construction Accountant.
It all takes money from someplace.
Even if it is from a line of credit; the bank wants to see
financials not some scribbled notes on the back of a brown paper
bag.
Frequently Asked Questions From
Contractors:
Am I too small for you to help? I am just getting started.
My answer is No - You Are Not Too Small. We have a plan for
the Brand New and Existing Small Contractors.
Shouldn’t I learn how to do all of my own bookkeeping before
turning it over to you?
My Answer Is No – It is not possible to be an expert in everything
we do.
Learning what receipts to keep is more important than learning “How
To Put Them Into QuickBooks
When I hire you – Will do everything for me?
My Answer Is No – You will continue to control the money.
We are here to help, but all final decisions on How Much To Bid the
job.
What, When and How Much to Invoice your client is your
decision.
Who to pay and when to pay them is also your decision.
We have a Document Management System that links to your banks and
credit card companies.
We receive feeds (copies of the transactions) after they have
cleared the bank, plus the monthly statements.
We will still need to receive Customer Invoices. Currently,
provide to our clients a Stand Alone invoice built on Excel.
Coming Soon: We are evaluating a web-based software that works with
QuickBooks Desktop for Dispatching and Invoicing for everyone’s
convenience. Will keep you posted on our progress.
Not all software works as well as advertised which is why we test,
test, test before using it or recommending it.
The only money we touch is our own Fees.
Auto receives for Monthly Outsourced Accounting and Bookkeeping
Services on the 1st day of each month.
Auto receives for Weekly Outsourced Accounting and Bookkeeping
Services on Monday of each week.
Other Customer Service Options Available
Cloud Hosting is available for clients who want to do their own
Accounting And Bookkeeping but be on our server for web-based
access; occasional review and support.
FastEasyAccountingStore.com is available for all
contractors who want to purchase QuickBooks Setup and / or
QuickBooks Chart of Accounts to enhance their existing QuickBooks
accounting systems.
Consulting is available to Outsourced Accounting Clients, Hosted
Clients and FastEasyAccountingStore.com and all contractors around
the world.
Looking forward to being of assistance as you choose the options
that best fit your needs.
Enjoy your day.
Sharie
About The
Author:
https://www.fasteasyaccounting.com/free-one-hour-consultation-bookkeeping
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. http://www.fasteasyaccounting.com/sharie-dehart/ 206-361-3950 or sharie@fasteasyaccounting.com
I trust this podcast helps you understand that outsourcing your contractor's bookkeeping services to us is about more than just “doing the bookkeeping”; it is about taking a 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 to 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
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:
This guide will help you learn what to look for in outsourced construction accounting.
Need Help Now?
Call Sharie 206-361-3950
Thank you very much, and I hope you understand we 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 | The Contractors Accountant
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