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    Fixing Contractor Profit Drains Leads To Easy Profit Increases

    Posted by Randal DeHart on Wed, Jun 12, 2013

    Contractors That Do Not Earn Large Profits see contractors bookkeeping services as overhead which leads to the following profit drains:

    • They get a cheap computer, tiny monitor, garbage printer, tiny desk and broken down chair that even the dog would not sit in and tell the bookkeeper this is all the company can afford.

    • In an effort to get their money's worth the contractor assigns all kinds of additional tasks to the bookkeeper like running business and personal errands, pickup and deliver material and paperwork to the jobsite, make coffee, answer the phones, take out the trash and clean the bathroom. Anything and everything to get "value" out of the time and money that is being wasted on bookkeeping.

    • Contractors can miss a lot of deadlines but miss a payroll and they are out of business. The day that happens your staff is looking for a new job no matter what they tell you. The contractor gets angry and makes deep noises from the chest sound like important messages from the brain and blames the bookkeeper for the missed payroll.

    • What has now evolved into The Incompetent Bookkeeper will respond with something like: "The timecards never arrived so I could not process payroll!" The contractor simply responds with something like: "You should have figured out how to get them even if it meant using your car, your gas, your personal time and have gone to the jobsite and got them, it's your fault! I depended on you to do your job and you let me down!"

    • This is where the ordinary decent, pleasant bookkeeper starts growing an attitude thinking you don't understand how difficult bookkeeping is with a program like QuickBooks for contractors that is all screwed up and won't work right! Getting anything done in QuickBooks for contractors is a pain, a big fat royal pain, let alone all the other stuff the contractor wants done.

    • The bookkeeper thinks you don't know and you don't care because you hired them to take care of the paperwork and that is exactly what you did because in business you produce reasons or results and reasons don't count.

    • Next, your vendors and suppliers don't get paid on time or worse yet you miss the 2% discount if paid by the 10th which in effect means you are paying 36% annual interest rate penalty and when you ask why the bookkeeper says they didn't have enough time to get the bills into QuickBooks.

    • This starts another round of talks about how you work 10 to 12 hours a day if that what it takes to get the job done and if the bookkeeper really cared they would do the same and only get paid for 8 hours.

    • Now your bookkeeper gets angry and begins to realize what little they know about bookkeeping is far more than you know. They suddenly realize "The one-eyed man is king on the island of the blind!"

    • Next the payroll tax returns, sales tax returns, labor and industries tax returns, business and occupation tax returns, city licenses and liability insurance audits start slipping and the fines and penalties add up.

    • And then bookkeeper starts testing the limits of your tolerance by coming in a few minutes late and leaving a few minutes early. Talking on their cell phone whenever they please. When you ask for a report they say: "I will get to it later" or "QuickBooks contractor will not do that" or one of my favorites: "Can't you see I'm busy?"

    • If you choose to fight and demand the report the bookkeeper may work a little harder to get it done or they may do what the cook in some restaurants do when you send a meal back to be "fixed", they get even. Instead of spitting in your food the bookkeeper will start taking shortcuts like using Journal Entries to input credit card charges which totally destroys Job Costing Reports.

    • If you choose flight your bookkeeper will evolve into a bad bookkeeper and you may want to burn the reference book with the handwritten notes in the margins left by the previous bad bookkeeper who left the company after embezzling a substantial amount of money because you have trouble brewing.

    • If you choose replacement you can hire another in-house bookkeeper and repeat the process or you can save time, money and aggravation by outsourcing to a competent Construction Bookkeeping Service. The choice is yours just think about it before you allow bad bookkeepers to drive you insane!

    Let's look at an example of what the incompetent bookkeeper is costing that is known and knowable in the first year using fully burdened bookkeeper labor costs:

    Fully Burdened Bookkeeper Cost - Simply means what it will cost you to hire someone including the company portion of the payroll taxes and all those little costs that only an accountant like me would think about. The example below shows a part-time in-house bookkeeper at $15.00 an hour working 10 hours a week. Notice this poor soul does not have any benefits at all and they still cost the company $25.29 per hour!

    Actual cost for bookkeeper paid $15 per hour for 10 hours a week

     

    • QuickBooks Setup wrong and wasted 2 hours x $25.29 = $50.58

    • Overpaying for payroll processing 2 hours x twice a two hours a day = $6,828.30

    • Overpaying by two hours a day for bookkeeping = $6,828.30

    • Lost productivity from bad QuickBooks setup 30 minutes a day = $3,410.10

    • (click here for sample of what is 10 minutes costing your construction company)

    • 2% on lost discounts X $100,000 in purchases = $2,000.00

    • Late Quarterly Tax Reports $25,000 X 25% Penalty = $6,250.00

    • Estimated Total = $25,367.28

    • Estimated Savings 40% By Outsourcing Bookkeeping = $10,146.91

    • Does not include overpaying income tax, lost productivity due to stress and a number of other unknowns.

    Outsourcing Pays Which Is Why Oil Change Stores Are Popular

    Outsourcing your construction bookkeeping to us is even better because all construction bookkeeping services are done in our office in Lynnwood Washington by skilled construction bookkeepers and construction accountants.

    Profitable Construction - Companies have known about the value of outsourced bookkeeping services for a long time and now you know about it too!

    Business Process Management (BPM) For Contractors

    QuickBooks Expert Specializing In Construction Bookkeeping Services


     

    About The Author:

    Randal DeHart, PMP, QPA The Construction AccountantRandal 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.


    Topics: Contractor Profit Drains

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