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How Construction Companies Can Get Paid The Easy Way - Cash Flow

Posted by Randal DeHart on Wed, Sep 21, 2011

We Show You How To Get Paid The Easy Way

All construction problems are related to cash flow or communication Some construction company owners are gung-ho about doing the work and yet are embarrassed about asking for money. 

Here are the 10 most popular excuses for not asking for money:

  1. The customer just signed the contract and I haven't done any work yet

  2. As soon as I need money I will ask for it - See Cash Flow Diagram

  3. I don't want to look bad in front of my customer by appearing needy

  4. I don't want to appear financially weak in front of my staff

  5. My wife is good at managing what little money I bring in so I don't need any just yet

  6. I have personal and business credit cards to finance the work

  7. I have many charge accounts at suppliers everywhere

  8. My sub-contractors don't bill me until the end of the month

  9. I have a little cash in savings I can use for a while

  10. I have a line of credit on my house (Wives hate and FEAR this one)

When To Ask For Money
  • When the contract is signed ask for a deposit And record it in QuickBooks and on the Pay Application. We recommend one week of work as a fair deposit. To calculate it take the contract amount and divide it by the estimated number of weeks to complete. For example: Contract $50,000 / 5 weeks = $10,000. Use this money for working capital and stop financing somebody else's dream.

  • Progress Payments Every week, perhaps on Monday, you could review the work that was completed the week before, issue a simple invoice or better yet give your customer a comprehensive payment application and get paid.

Payment Application Summary Page

Payment Application Summary

Payment Application Detail Support Page

Payment Application Detail

  • Change Orders Every change order has a clear scope of work and pre-determined price which needs to be documented IN ADVANCE OF THE WORK BEING DONE and paid in advance.  Sound strong doesn't it?  Well change orders have a short-short shelf life...the value of the work and the motivation to pay for the work on all Change Orders rapidly diminishes after the work has been performed. This happens a lot because some of your customers think you should have read their mind and have known in advance they were going to want the change. Keep change orders paid early and often or Christmas may come early for your customer and not at all for you and your family.

  • Final Payment When the work is done when you prepare the final invoice you will credit back the deposit and either issue a small refund check or collect a small check.

  • If you did everything right you did not put any of your money into the project.

Quiz: How Many Projects Can You Work On?

  • If you put money into each one Make a list of all your cash and anything you can turn into cash: checking + savings accounts + credit cards + suppliers credit limit + home equity line of credit + other lines of credit + kids college fund + Christmas fund + vacation fund + loose change + gold + silver + jewelry + any other cash or anything that can be converted to cash.  Add it all up and that is how much construction work you can do and hope to get paid.
  • If you operate on your customers money Your limits are how determined by your soft assets, business systems, and your hard assets including equipment and employees.  

Business Strategy For Your Construction Company Could Be The Ultimate Answer

Large Profitable Construction - Companies have known about and used some form of Business Process Management (BPM) for hundreds of years. During the past 100+ years colleges and universities have pumped business majors with in depth understanding of how BPM works and the good ones that actually paid attention, did the homework and understood the system have been scooped up and hidden away inside the financial and project management offices of these same large profitable construction firms. Click Here To Learn More

For Construction Company Owners who do not need the full power of QuickBooks for contractors and want 24/7 online access we offer Xero Accounting Online and we have custom setup for construction companies. Click Here For More.

This Is One More Example of how Fast Easy Accounting is helping construction company owners just like you put more money in the bank to operate and grow your construction company. Construction accounting is not rocket science; it is a lot harder than that and a lot more valuable to people like you and me so stop missing out! Call Sharie 206-361-3950 or sharie@fasteasyaccounting.com and schedule your no charge one-hour consultation

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Profitable Contractors and Construction Company owners have known about the value of outsourced bookkeeping services and contractor coaching services like ours for a long time and now you know about it too! 

We Scan Your Receipts And Invoices link the appropriate transactions to QuickBooks or Xero Accounting Online depending on the construction accounting service you are using and provide ongoing Cloud Based Contractors Bookkeeping Services by accountants who understand construction.

Thinking About Outsourcing Your Contractors Bookkeeping Services To Save Time And Money?

Click On The Button Below To Download A Free Guide

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Business Process Management (BPM) For Contractors

Need Help Now?

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About The Author:

Randal DeHart, PMP, QPA The Construction Accountant 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, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets 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 Xero 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.

Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+


Topics: Pay Applications, Invoicing, QuickBooks For Contractors, Business Process Management For Contractors, General Contractor, BPM

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