Construction Profits Are Simply
[Income - COGS - Expenses] = Profit
"If You Know The Answers The Questions Will Not Bother You" - Randalism
Let's Get Some Answers - Contractors and sub-contractors know there is more to profits than what is shown above and most of you rely on your "gut feel" to know when project has made a profit or not.
Most contractors add a 5%-25% profit margin to their estimated costs to arrive at a final bid price which means a minor increase in any of the big four Labor, Material, Other Costs and
Subcontractors can have a huge negative impact on your QuickBooks For Contractors Job Profitability Reports.
For contractors not familiar with income and expenses flow for a typical mid-size construction job, consider the following general example.
Example Job 1001
Bid Price = $60,000
Three Monthly Payments $20,000 Each
Job Costs Are Heaviest In Month One And Get Lighter Month Two And Three
Month 1: Materials, labor and G&A expenses are paid by the contractor but only part of the contract amount (draws) has been collected to offset the expenses. At the end of month 1, the project shows a loss.
Month 2: Labor, materials, G&A (overhead) are expensed by the contractor for Month 2, but no payments (draws) are still behind the job costs for Month 2. At the end of Month 2 the project still shows a loss.
Month 3: The project is finished and the balance of the project is paid in full. At the end of Month 3, the project starts to show a profit.
Net Result: Gross Profit on the job is $5,000 at the end of Month 3
There Are More details regarding opportunity costs including why two contractors can do the same job and have the same expenses yet one contractor will earn more profit than the other one due to differences in Construction Company Business Process Management Strategy.
The Short Video Below Shows A Sample Of It
With Bonus Material On Cash Flow
Without proper tracking and matching of income and expenses, most construction companies never know if they made a profit until the job is over.
Because of the special nature of construction accounting, most accountants have little understanding of how construction accounting works. Construction accountants are trained to provide accurate information for contractors while C.P.A.'s and tax preparers are trained to make certain contractors pay their fair share of income taxes. Learn more...
The bottom line is working with us you get the best contractor bookkeeping services company on your side which means you will improve your chances of success substantially. We are not Jack-Of-All-Trades, Master-Of-None accountants or bookkeepers who take anyone who contacts us. We are construction accounting specialists, with one purpose and only one purpose; serve construction contractors who are in business and those who are preparing to get into business. Who We Help...
QuickBooks Expert Specializing In Construction Bookkeeping Services
About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional and Construction Accountant and Intuit ProAdvisor. This combination of experience and skillsets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.