Reviewing QuickBooks Profit And Loss Reports - From our construction accounting clients reminded me of something I learned in my own construction businesses a long time ago. Construction accounting financial reports can be like staring at a hill of beans if you don't know what you are looking at or why.
We Have Seen So Many Contractors - Over the years with the right tools for the job, and they attend numerous training courses to improve their technical skills, but when it comes to construction management, they look at the financials as if it is a foreign language. Understanding only a few of the numbers can really improve your bottom line.
We Are All Slaves To Our Habits - We all have thinking, acting and doing patterns which allow us to function day to day. Change is not always easy but it’s necessary to grow a healthy and profitable construction business.
Your Construction Business - Is a reflection of your current habits. Failure is the habit of making a few errors in judgment every day. Success is the habit of practicing a few simple disciplines.
Examine Where Construction Accounting - Is at on your priority list. Is it using QuickBooks for a glorified check register or is QuickBooks setup properly for construction accounting and being maintained in such a way that it provides you what you need to optimize the value of your Board of Advisors to operate and grow your construction business?
Our QuickBooks Setup - For construction accounting separates direct and indirect construction costs from overhead costs. This is the first step to designing QuickBooks construction accounting system for Job Cost Reports and Job Profitability Reports that make sense.
Proper QuickBooks Reports - Can help you shop for liability insurance carriers, material suppliers and other goods and services. Bearing in mind the cheapest anything is rarely a good value. Always remember to Optimize not Maximize. Storing bars of gold in a paper bag and leaving them on the back porch of your house in order to maximize savings on storage container costs may not work well in the end. It is the same with suppliers; pay a fair price for good service.
Re-Evaluate Your Gross Profit Percentage - Another area most construction company owners let fall between the cracks is gross profit on material. Gross profit is the difference between revenue and the cost of the material before overhead.
Here Are Some Thoughts On Gross Profits:
Lower prices do not always equate to increased sales.
Sales resulting from lower prices will require you to sell more to maintain the same level of profitability.
Generally speaking - If you raised your gross profit on materials by 1%, it would require a 4% increase in overall sales to realize the same gain. Increasing sales is always a desirable but, in reality, you have more control over your estimating and pricing than you do over sales or potential sales. People who buy from you solely due to pricing are customers not clients; they belong to whoever has the lowest prices in the marketplace.
Having A Profitable Construction Business - Allows you to do what’s best for your clients and, building long-term relationships with your clients by exceeding their expectations will help grow your bottom line.
We Have Two Rules - Rule #1 is take care of our contractor clients and provide the best construction accounting and consulting services we can. Rule #2 make money; however, when in doubt always, refer to Rule #1. It’s our responsibility as business owners to run a profitable business in order to provide the level of service our customers expect.
When You Begin To Understand - The magical mystical story that your QuickBooks reports and the Five Key Performance Indicators (KPI) combined with Profit And Growth Strategy laid out before your very eyes then a whole new world of what appears to be money growing on trees opens up!
About The Author: