During my lifetime, I have seen too many contractors work hard, never have enough money to retire. Some of them die from exhaustion, and others just wore themselves out and lived their final years in poverty and only a few, less than 5% ever made enough money from owning and operating their construction company and outside investments to retire early enough and enjoy a comfortable lifestyle.
This article is a bit strong, and it could offend some folks. If it offends you, please accept my sincere apologies. I tend to tell it straight and not sugar coat anything because I have been involved in the construction industry most of my life beginning with working in my Step Father's construction company after school in the mid-1960s.
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Topics:
Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
If a Contractors Bookkeeping Services System doesn't work and they want it fixed but will not allow any changes, they need a magician, not a construction bookkeeper. Our workflow removes paperwork frustrations only if the contractor is also willing to do their part.
It hurts when we have to let a contractor client go elsewhere because we are not able to help them. We sincerely believe we can help all contractors have more freedom, by earning more money, working fewer hours and sleeping better at night by taking the pressure off their bookkeeping so they can focus on financial reports and job costing reports, instead of data entry.
In a few rare cases, contractor clients have wanted specific financial and job costing reports, but they flatly refused to allow us to make changes in their contractors bookkeeping services system which would have made it possible.
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Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
Journal entries are a quick and dirty way to get transactions in without putting forth the time and effort to enter each transaction. In the short run, you save time; in the long term, you can forget about the accurate
Job Cost Reports.
QuickBooks set up right and choosing the correct QuickBooks Version (QuickBooks Mac here) is the most critical part of being able to generate accurate reports including Job Cost Reports all because it is the foundation upon which your entire financial system is built. Put the wrong foundation under your business, and it will not matter who is doing the bookkeeping because it will always be a mess and you will never get the reports you need to operate and grow your business profitably. Your
Board of Advisors and especially your banker
will be unhappy; however, they may not say it outright, just that your loans, lines of credit, and referral opportunities may be limited.
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Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
As a construction or trade contractor, you are highly skilled, intelligent, and adaptable. That is a given because you operate in a multi-faceted changing environment doing the impossible with limited time, money, and resources on every project. Moreover, soon as one is finished, another one is waiting for you.
Many contractors like you feel that hiring a Professional Contractor Bookkeeping Service is a waste of money when you should be able to do it yourself. You press a few keys on your keyboard thinking you are going to get the results you want, accurate bank balances, a report showing who owes you money and who you owe money to, a Profit and Loss Report and Balance Sheet Report you can understand and if all goes well perhaps even some Job Costing Reports. Instead, what you get is a hot steaming pile of fertilizer that cannot even be used in the garden.
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Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
Many contractors are having trouble adapting to the new economy. I have made more mistakes – than ten of the average contractors put together. I've learned a great deal of hard, hard lessons, and worked my way through several "Character Building Moments." What I am about to ask you to do is something I have done for many years during my contracting days, and it still works.
Understanding Other Costs:
Marketing Cost
The cost your company spent to acquire and maintain the job. Depending on how you allocate marketing dollars as a percentage of sales or a fixed budget will have an impact on your marketing cost per job. Your cost-per-call, closing ratio, and other related information is all part of your operations, accounting, and bookkeeping reports.
Mobilization Cost
Are the costs you incurred to get a crew to the job site in terms of travel time and vehicle operating costs; and then the labor costs to unload tools, equipment, and material and put everything in place for easy access and not in the way of the work to be done. These costs are generally high and fixed.
Demobilization Cost
Are the reverse and generally lower because it takes less time to load the truck or van since you know where everything goes, and you know the quickest route back to the shop or office. These costs are also generally high and fixed.
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Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
All construction contractors have experienced the financial pain of bad debt, which is defined as a customer who refuses to pay no matter what you do.
I've been there before, and it will probably happen again in the future. Owning and operating any business, including accounting, means sometimes you provide goods and services and not get paid.
Knowing The Answers Helps
"If you know the answers, the questions will not bother you" - Randalism.
In school, when you sat for an exam or a test, and you knew the material forwards, and backward, it was fast and easy. The exams and tests for the classes you struggled with were the opposite.
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Contractor Challenges,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
In the mechanical trades of the construction industry, plumbing, electrical, HVAC and related fields of irrigation, low voltage and audio / visual equipment companies there are lively discussions happening regarding "Repair Versus Replace."
Most of the time, the participants are more fixed in their positions and intense with passion than any political or religious discussion I have ever seen.
The primary question involves a deep-seated paradigm regarding the definition of honor and integrity. Is it more honorable and better for the client to treat every mechanical part as something that must have every last bit of use squeezed out of it before replacing it? Or is it better to replace it at the first sign of breakage? Or lastly is there a middle ground?
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Construction company cash flow is the movement of money in and out of your contracting business; these movements are known in accounting circles as inflow and outflow.
Inflows for your construction company primarily come from the sale of goods or services to your customers, but keep in mind that inflow only occurs when you make a cash sale or collect on receivables. Cash is king! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.
Outflows for your construction company are generally the result of paying labor, material, other direct and indirect costs of goods sold and overhead expenses.
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Payment Collect,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
Estimating and submitting bids are one of the most stressful and nerve-wracking sides of your construction business. It is essential to keep in mind that "break-even" in the construction business is challenging to calculate because most projects are one-of-a-kind custom jobs. Proactive contractors have systems and cost libraries with pre-priced assemblies for bidding, which works in conjunction with Strategic Construction Accounting to provide management with progress invoicing, job costing, and job profitability.
With poor bookkeeping, misguided judgment, and clerical errors come bad decisions on what projects to bid and not to bid on until eventually, you'll run out of time and money. This is why some construction projects fail or worse, construction companies get bankrupt.
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Contractor,
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Contractor Operating Tips
Perhaps more.
An alarming number of construction company owners are being ripped-off and driven into bankruptcy.
That sounds harsh, but it's true. Whenever we see a contractor heading towards a problem, an issue, or a big disaster, we immediately raise the alarm. We are cautious about doing it so when we say there is a potential problem, our clients know we are serious.
Contractors by nature are tenacious, resilient and have a tremendous amount of "Grit And Determination To Succeed" which means they are not easily disturbed or prone to react hastily or rashly at the first sign of trouble. This is just one of the many qualities I sincerely admire about these wonderful men and women.
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Payment Collect,
Contractor,
Contractor Tips,
finance,
Contractor Operating Tips
