Every day Your Get Bombarded with ways to spend your hard earned money. Instead of saying no all the time here is a key strategy you can use to separate the good from the bad.
Organize them into three simple piles:
Simple one-time investments
Large purchases with a down payment and subsequent monthly payments
Initial purchases followed by monthly or yearly maintenance payments
Apply three investment formulas
Present value calculations
Internal Rate Of Return (IIR)
Discounted cash flows
Opportunity costs
For a quick review of the concepts outlined above click on the button below
Here is how we do it for our clients
They provide three bits of information and we generate the report for them
The cost (exact or rough estimate / whatever they have)
How long they expect the tool / equipment will last (weeks / months /years)
How much time they estimate it will save (minutes / hours / days)
From three bits of information and some custom reports we put into their QuickBooks For Contractors file we generate a one page summary report with support sub-documents as needed for them to make intelligent informed decisions.
Shown Below - Is a very simple formula to give you some insights on investing in a one-time office equipment upgrade. The principle applies just as easily with field tools and equipment using Office Labor Cost Calculations.
Step 01 Initial Investment - Projected cost of the opportunity
Step 02 Alternate Use of Funds - Projected loss of interest or cost of borrowing initial investment
Step 03 Marginal Cost - Projected total Initial Investment plus Alternate Use Of Funds
Step 04 Marginal Revenue - Projected NEW revenue or savings from the opportunity
Step 05 ROI - Projected Return On Investment as a percentage
Step 06 Payback - Projected number of years for the opportunity to payback the Marginal Cost
Step 07 Annual Dividend - Projected NEW revenue or savings each year
Step 08 Life Span - Projected number of years the company will generate dividends
Step 09 Lifetime Value - Projected lifetime Value = (Annual Dividend X Life Span)
Step 10 Lifetime ROI - Projected lifetime Return On Investment as a percentage
Step 11 Construction Company - Annual profit as a percentage
Step 12 New Sales - Needed to generate same profit
The Problem
Bookkeeper has one 19" RGB monitor on the desk
Hard to see numbers which causes eye strain
Bookkeeper is wasting 30 minutes a day due to poor equipment
Invest In Dual 27" DVI monitors for your bookkeeper's computer at a rough cost of $600.00
Bookkeeper has two 27" DVI monitors on the desk
Numbers has no eye strain
Bookkeeper is not wasting time
Increase Sales Or Reduce Costs - The two main drivers of profit. Best practices from successful construction companies are to do both. The key is a thorough analysis on a case-by-case basis for each opportunity.
The Example Shown Above - Should take about fifteen minutes if your QuickBooks setup is correct for construction and properly maintained so that it generates accurate useful reports.
If Your QuickBooks - Is not generating accurate reports contact us immediately because most business failures can be traced back to a lack of Key Performance Reports and bad bookkeeping. Download the free contractor bookkeeping checklist to find out for yourself if everything is on track.
Profitable Construction - Companies have known about the value of outsourced bookkeeping services for a long time and now you know about it too!
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