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How To Avoid Overpaying Your Construction Business Tax

Posted by Sharie DeHart on Fri, Dec 18, 2020

Contractors want to maintain control without making any changes. "Keep doing the same thing but expecting a different result." 

Throwing the receipts in a shoebox (behind or under the seat in the truck) is the favorite way to deal with paperwork. This is "Under Managing" and frustrates everyone around them who is playing "Where's Waldo?" Job costing is nonexistent; bills are usually paid late, customers are unbilled, lost, and forgotten.

On the other hand, micromanaging every detail is an over-reaction from years of doing as little bookkeeping as possible to prepare the tax return. Knowing what to do, however, will stop you from making a big mess of it.

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Topics: How To Lower Your Tax Bill, Construction Profits, Construction Accounting, Reduce Taxes, Contractor, Contractor Tips, Contractor Operating Tips

Costly Bookkeeping Mistakes That Kill Profit And Growth

Posted by Sharie DeHart on Fri, Sep 25, 2020

Most construction business owners like you understand that effective financial management is key to your success. But lack of knowledge, frustration, and even avoidance can add up to your bookkeeping mistakes that derail future company growth.

With everything contractors like you need to do every day, including weekends and holidays, it's too easy to let crisp, timely Financial Reports go unread, and in some cases, you may not fully understand what they are telling you when you do read them.
 

 

Protect your construction business and reduce stress by avoiding these costly bookkeeping errors:

Mixing personal and professional finances

From day one, business owners should have a separate bank account to deposit their income and pay their business expenses.

It's also crucial to designate a business-only credit card. Come tax time; separate statements will make submitting claimable expenses quick and easy while reducing painful audit risk.

Letting accounts receivable slide

It's frighteningly easy to lose track of which customers have paid you and which clients are late. Implement a strict policy and schedule for tracking accounts receivable and pursuing unpaid invoices. 

  • Ask customers to pay at the point of purchase or no more than 30 days later;
  • Contact clients to confirm they have received your invoice and to agree on a payment date;
  • Follow up immediately when payment dates are missed; and
  • Keep accurate, up-to-date records of each client's payment history.

Investing in a cloud-based accounting solution can make AR a breeze by automating your monthly invoicing – and contacting late payers with a reminder email. 

Not tracking direct construction job for each job or project

If you want to know where you are making and losing money, you need to implement a system of Job Costing. 

Not allocating overhead to jobs

For your Job Costing and Job Profitability Reports to be useful, you need a way to allocate overhead among jobs. Overhead generally refers to costs that benefit all jobs.

For Example:

  • Office And Shop Rent
  • Office Supplies
  • Admin Staff Salary
  • Officer Owner Salary
  • Marketing And Advertising
  • Consulting, Legal, And Accounting
  • Other Overhead Costs

Not using tech to track your expenses

Tired of chasing down missing receipts and struggling to justify claims come tax time? There's an app for that! Our outsourced bookkeeping clients have mobile apps specific to their company needs that integrate seamlessly with QuickBooks or Xero.

Neglecting to strategize for long-term growth

Practical accounting means managing day-to-day finances while making provisions for future growth. Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools construction business owners can use for future forecasting.

Familiarize yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and discover new ways to increase profitability. Talk to your accountant about which reports and metrics are most important for your particular business and how to utilize them. 

Final thoughts

You don't have to go through it alone. 

Construction business owners like you are rarely trained accountants. Don't try to manage your company's finances all by yourself. 

Collaborate with a trusted professional, invest in quality IT solutions, and spend some time familiarizing yourself with relevant tools and trends. 

You'll feel empowered, which is step one to forging a more love-filled relationship with small business accounting. If you need help avoiding these mistakes, fill out the form on the right and I'll be in touch with you.

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. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

 

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THE BUSY CONTRACTOR
IN A MOBILE ENVIRONMENT

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Simply scan the QR code or search for ‘MyAccountants’ in the App Store and enter the Access code: FEAHEROS to utilize the powerful App features and capabilities, and benefit from having our Construction Accounting App at your fingertips, 24/7."

PS: Even if you are not a Construction Contractor you will find a plenty of benefits in the app so we invite you to download it too! It's Free so why not?

 

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Topics: Construction Profits, Construction Accounting, Contractor, Contractor Tips, Contractor Operating Tips

Contractor Clients' Four Critical Words That Leads To Change Orders

Posted by Sharie DeHart on Fri, Sep 18, 2020

Are you sick and tired of customers continually changing stuff on you and creating delays or extra work?

Is your customer leaving you "love notes" regarding minor changes they would like to make on the counter or someplace you can easily find them when you first arrive in the morning? Or the never-ending chain of emails. Or greeting you with "I/we thought we would like to have...."

Do these notes, emails, or greetings send you into a mental or alone verbal rant about why they can't leave you alone to get your work done?

Are you concerned they expect you to do the additional work for FREE, NO CHARGE, NA-DA, ZIP, ZERO?

You needed to be compensated for your time and your crew's time, and you need to do it right away.

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Topics: Construction Profits, Construction Accounting, Profitable Leads For Contractors, Change Order, Customers, Contractor, Contractor Tips, Contractor Operating Tips

Contractors, Know What You're Good At And Generate More Leads

Posted by Sharie DeHart on Fri, Aug 14, 2020

The pressures of owning and operating a construction company can be, at times, almost unbearable. Unlike any other business, there's no "one size fits all" solution in your toolbox to fix your dilemma.

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Topics: Construction Profits, Construction Accounting, Profitable Leads For Contractors, Customers, Contractor, Contractor Tips, Contractor Operating Tips, SWOT Analysis

Five Ways To Increase Your Construction Business Profit

Posted by Sharie DeHart on Fri, Aug 07, 2020

First, we always ask our clients to decide what they want from their construction company. Do you want to get rid of the boss? Do you want to work in a more structured environment? Are you sick and tired of working for the boss's son or daughter? Do you want to make much money? Do you wish to make enough money to pay the bills and enjoy a vacation now and then? There are no wrong answers, whatever is right for you is the correct answer; however, you need a reason to do it otherwise when the going gets tough, and it will, you will either win or lose depending on your purpose. With a big enough reason, you will find a way to win.
 
For many small construction companies, the best way to improve profitability is to increase turnover, as there's no limit to sales, but there is a limit to how much you can reduce your costs.
 
Let's look at how you can focus on each of the five ways in our profit increase calculator to achieve your goal of improving profits.
 
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Topics: Construction Profits, Construction Accounting, Profitable Leads For Contractors, Customers, Contractor, Contractor Tips, Contractor Operating Tips

Snacks

Posted by Randal DeHart on Thu, Jun 16, 2016


One Tiny Bit Of Knowledge High Profit Contractors

Use To Get Well Over 100% Return On Investment

They Provide Snacks And Beverages for their field workers and office staff. What you say? It costs money! How is spending money going to make me money? Perhaps you think I am crazy! Read though and pay special heed to the three Profit Enhancement Strategies near the end.

Let's Take A Look At A Typical Construction Worker Named John

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Topics: Construction Profits, Cash Flow, Increase Profits

Four Key Words To Increasing Your Contracting Cash Flow And Profits

Posted by Randal DeHart on Fri, May 06, 2016

The Four Most Important Words Your Construction Clients Say:

  • "While it's open anyway...." (the walls, floors, ceiling)
  • "Since we're this far..." (in the project, remodel, new house)
  • "I have an idea..." (for more work to be done, change something)
  • "Now my wife wants..." (more, more and more)

Highly profitable and very successful Contractors like you respond with...

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Topics: Construction Profits, Construction Strategy, Increase Cash Flow

Contractors Who Feed Workers Make Lot More Money

Posted by Randal DeHart on Fri, Aug 21, 2015


One Tiny Bit Of Knowledge High Profit Contractors

Use To Get Well Over 100% Return On Investment

They Provide Snacks And Beverages for their field workers and office staff. What you say? It costs money! How is spending money going to make me money? Perhaps you think I am crazy! Read though and pay special heed to the three Profit Enhancement Strategies near the end.

Let's Take A Look At A Typical Construction Worker Named John

Read More

Topics: Construction Profits, Cash Flow, Increase Profits

Construction Company Profits Are Easy To Understand

Posted by Randal DeHart on Thu, Jun 20, 2013

 

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Topics: Construction Profit Diagram, Construction Profit Example, Construction Profit Video, Construction Job Cash Flow Video, Construction Profits, Construction Company Profits Defined, Construction Profits Cash Flow Video

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