Contractor Bookkeeping Basics and Why
Today’s technology says “Do Everything On Your Phone”
Use an app to create an estimate, or better yet just send the estimate in the body of the email. That works when the customer’s reply is “Do It”. Great you start the job, finish the job, never send the customer an invoice; Why – They Don’t Need One – they know how much to pay from your original email because you included short explanatory paragraphs about each item of work you did.
You move on to the next job. Weeks go by. If the customer is expecting a “formal invoice” and do not plan to pay until they receive one. More time passes; you are waiting to “GET PAID” and the customer is waiting “To Pay You”.
Some customers will take the extra effort to call, leave a message, text, or email you asking for the invoice so they can pay. MANY customers will say nothing until The Contractor sends the invoice they are NOT Paying and NOT doing any follow up. Months go by, and still, no check arrives.
Many contractors think they have someone who hasn’t paid but are unsure of who the customer was. Often times the contractor feels too much time has passed and doesn’t try to go back and bill old customers.
What came in the mail was all of the supplier invoices for the job. All of the subcontractor invoices, and YES, the payroll for the job has been paid. The person who did NOT get paid was The Contractor.
Get The Money, Collect Ongoing Payments, Get Job Deposits – Use Customers Funds for Material. DO NOT BE THE BANKER FOR YOUR CUSTOMER! Contractors are not bankers!
First Step No matter what app you use. Make sure it has a “mini” invoice program for emailing customer an invoice. You can then go back and have a paper trail that you asked the customer for money.
Second Step Track your time Use T-Sheets to keep track of the jobs you were on. (This is good for Contractors who do not have employees) What If you have to lienthe job? One of the questions are when was the last day on the job? The answer could be the difference between having any lien rights and collecting the money or getting nothing but attorney or lien service fees. Use a Lien Service for Notice to the Owners on larger jobs. Double check with your supplier. Does the supplier send out Notice to the Owner? Even if your Lien Rights are gone – Maybe your Supplier’s Lien is Valid and Collectable.
Third Step Accept Credit Cards. More customers have room on their credit card than “Cash In The Bank.”
Getting Money Now offsets the fees charged by your Merchant Service Provider. Many services that offer invoice programs (Estimating Software, Dispatch Software, Invoice Software) have an add-on feature for Merchant Services.
Customer follows the link, puts in their credit card number or bank routing and account number for easy payment. Again, worth the fees to GET PAID NOW!
Behind the scenes, every Contractor should do additional Bookkeeping. Some invoice programs will track the payments received, but that is the extent of the bookkeeping. The Contractor’s Bookkeeping needs go beyond sending an email to the customer with the price of the job and taking the check to the bank.
Customer Invoice Tracking Is knows Who Owes You Money AND How Much
A proper Construction Contractor Bookkeeping System is setup to create a Customer Invoice. Receives Payment. Seeing the balance if anything is owed. Accounts Receivable Aging Report is one of the reports banks look at before giving you a business loan.
Bankers want to know What is your volume (sales) What have you collected (customer payments) and How Much Do Customers Still Owe You and finally How Long Does It Take You To Collect. In some industries 30-60 days is common.
I have heard stories about larger retail stores who paid promptly after the first 6 months. It was surviving the first 6 months that was hard for smaller suppliers and Tenant Improvement Contractors.
Accounts Payable is keeping track of the bills owed to a supplier or subcontractor
A proper Construction Contractor Bookkeeping System uses the Accounts Payable feature to track the unpaid bills. Again, the Banker wants to know how long it takes to pay your bills. The Bank wants to get paid and unlike The Contractor who is embarrassed to call an old customer; The Bank is very willing to Call Early and Often for any outstanding payments due.
Another reason to keep A proper Construction Contractor Bookkeeping System is to be sure you did not Over Pay a supplier or subcontractor, cell phone, the internet, liability insurance, vehicle insurance and more.
The bills keep coming and depending on your payment schedule you may receive the Past Due Reminder Notice before the Original Bill has arrived. Some utility companies have a history of what appears to be randomly sending Original Bill
Some insurance companies if you do not immediately pay the invoice when it comes then the payment will be late and subject to a late charge. Based on where the Out of State payment needs to be mailed to it may be impossible to mail (by regular mail) and be received on time.
Hence – Online Payments Accepted. The benefit to The Contractor is proof the payment was made with a time and date stamp (Print) and usually an auto-generated email as backup confirmation that the payment was made.
Overpaying Sub Contractors can easily happen if checks are written on the job site. When using Hand Written checks be sure to use “Carbonless Checks” to have a written record of payments made. The payments than can be added to the Bookkeeping System without waiting for them to clear.
Bankers like the reports from a Formal Bookkeeping System (QuickBooks for Example)
It is an easy to understand report. Bankers can usually tell if the numbers are off because there is missing transactions, no enough income, too many expenses.
Contractor’s who do their own bookkeeping and are sometimes “Just Lost” Depending on the banker they use. Whether or not you get the loan or line of credit, you are after depends heavily on the way your Financial Reports are put together. The Net Result is that the Rates and Fees charged maybe higher and Amount Loaned maybe lower than expected!
Another Group That Likes Formal Bookkeeping System is the Local, State, and Federal Governments (IRS)
City Governments can require their revenue reports and payment due Monthly, Quarterly, Annually.
In Washington State; The Department of Revenue can make every contractor report and pay their Sales Tax Liability Monthly. For Companies with employees, Washington State Payroll taxes are due Quarterly.
The Internal Revenue Service want the 941 Quarterly Payroll Reports filed Quarterly. If tax liability for the Quarter is over $2500.00, then the payments are due Monthly. Larger companies have to pay their payroll tax liability at the time of each payroll. Reminder Estimated Tax Payments are due Quarterly.
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QuickBooks Desktop In The Cloud has the most flexibility in providing reports for all the of Contractors. From Brand New Startup, Handyman, Specialty Trade Contractor, General Contractor, Custom and Spec Home Builder and Commercial TI Contractor.
Every contractor, especially you have common needs that QuickBooks can easily provide. With our Customized QuickBooks Setup we are able to setup QuickBooks to meet the additional needs of the individual contractors and especailly you!
In The Future: As your Contracting Business grows and changes you may find additional services located on Fast Easy Accounting Store https://www.fasteasyaccountingstore.com/ that may be useful and helpful. Consulting is always available. (Outsourced Accounting only available in the USA)
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When You Become A Client - Then we can tap into our resources of knowledge and strategy banks. We use the reports hidden in your QuickBooks in order to diagnose and understand your construction business and develop plans and help you implement a path to success for you and you alone because every contractor has unique Strengths, Weaknesses, Opportunities and Threats (S.W.O.T. Analysis) that when understood can lead to a Strategic Roadmap which cannot help but make a lot of money.
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This Is One More Example of how Fast Easy Accounting is helping construction company owners all across the USA including Alaska and Hawaii 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 so stop missing out! Call Sharie 206-361-3950 or email@example.com and schedule your no charge one-hour consultation.
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!
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About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. http://www.fasteasyaccounting.com/sharie-dehart/ 206-361-3950 or firstname.lastname@example.org
PS: For The Do-It-Yourself Construction Bookkeeper Our Store Has Chock-Full Of QuickBooks Setup Templates, QuickBooks Chart of Accounts And More.
Most Contractors Setup QuickBooks Desktop Version In One Of Three Ways:
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#2 Asked Their Tax Accountant To Setup QuickBooks
#3 They Attended A How To Setup QuickBooks Class Or Seminar
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