If you ask 100 business owners what they like least about running a business, the chances are good that bookkeeping will rank high on the list. It's an annoying and frustrating chore that takes up much time and is easy to put off until tomorrow.
Moreover, Construction Companies have unique bookkeeping needs. Some bookkeepers and bookkeeping systems may cost you more than they are worth in salary, fees, and loss profits because you cannot get QuickBooks reports and financial reports when you need them. Chances are, you are suffering from bookkeeping pain, and your bookkeeper or accountant is overwhelmed trying to figure out how to do construction accounting.
Good bookkeeping leads to informed decisions. Avoiding your bookkeeping is dangerous, however. For example, not knowing your construction company's financial situation can result in a series of missteps that could ultimately cost you your business.
Here are three consequences of not keeping up with your bookkeeping.
1. You'll make poor decisions
You can only make informed decisions about your construction business when you have a complete picture of your current financial situation, including how much money is in your accounts, what your cash flow forecast predicts, and how much money you owe. Without that information, it's much more challenging to know when you can afford to spend money or when you need to hold back.
Without proper bookkeeping, your decisions will be based on how you think things are going, which isn't always accurate. For example, you may have just finished a good month and decide it's time to hire new employees only to find out you don't have enough money in the bank to pay them. Waiting three months to hire employees might be more profitable for you in the long run, but you won't know that because your books aren't up-to-date.
Maintaining your books ensures you have your company's entire financial picture available to make intelligent decisions.
2. You'll make financial mistakes
Your employees, subcontractors, and lenders all rely on you to make your payments on time, every time. In addition, payroll itself requires considerable attention to ensure your employees receive their benefits adequately.
Not keeping track of your financial books can result in expensive errors being made, including benefits being missed, bills not being paid on time, or over or under-payments. This could cost you extra in fees for late-payments or rushed payments, which also affects your books.
On top of all this, financial mistakes can lead to a lack of trust. You need a trusting relationship with your employees, contractors, and lenders. Unfortunately, payment errors can erode that relationship quickly.
3. You'll lose money
In addition to losing money in unnecessary late fees and payment charges, not keeping track of your books can result in lost money that your business desperately needs.
You won't know which of your clients or customers aren't paying you on time, which means you can't follow up with them or add interest charges for their late payments.
You could be paying too much in expenses, and if you don't reconcile your books, you'll have no idea that money is being wasted. Perhaps you purchased a software program to enhance productivity in the early days of your construction business. Maybe you stopped using it but forgot to cancel it, so each month for the past few years, you've been paying for a service you don't use.
Those payments add up and affect your overall financial position.
Final thoughts
Bookkeeping might be many entrepreneurs' least enjoyable task, but it's an important one. So if you find yourself putting off bookkeeping or dreading doing it, it's a good idea to look into hiring someone to do it for you.
Construction bookkeepers are trained and knowledgeable in the process, and they can save you valuable time and money in the long run. Otherwise, be prepared to set aside time regularly to do your books yourself and not let yourself put the task off. It's too critical to the future of your contracting business.
Want to get your books in order without adding more work to your plate? Get in touch with us today. Fill out the form on the right or here. You can also reach out to me through phone or email. Your privacy is important; I answer my own phone (drops into voicemail if I'm busy or after business hours).
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About The Author:
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. Call 1-800-361-1770 or sharie@fasteasyaccounting.com
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