Picking a Get-Me-By Contractor's Bookkeeping Solution in many cases is using an Excel Spreadsheet and a shoebox, file folders all dumped into a file box and looking at the Online Banking once in a while. This accounting method is the "I still got money, so I must be okay."
When you use today's Job Deposit To Pay For the material, labor, and subcontractors from the last job, it is also known as "Rob Peter To Pay Paul." Cash flow is never a problem until the sales stop; then it doesn't matter if it is the economy (your customers get laid off), domino effect (their customer didn't pay them), or you are unable to work due to being hurt on the job or get sick (flu or more serious illness).
Proactive versus reactive are the two methods of getting something done. I find everyone works in a combination of both, I included.
Proactive is scheduling and doing everything ahead of time. Nothing is ever waiting until the last minute. Reactive is more emergency driven and are things that need to be done now.
As much as we plan, it would be best if you were flexible, adaptable, and reliant. Things happen that are beyond your immediate control. Those of you who want a predictable environment are employees working for a large employer where schedules are fixed, and they are doing the same things every day.
How many times a day do you hear from someone saying, “It’s Boring", or "I’m Bored.” It is a red flag that should light up your “Oh Crap” meter. Moreover, more important, whenever an employee says it. Because this usually means they are shortcutting the work versus the fact that you have so many right processes in place that the work is genuinely dull. Being bored is a factor in manufacturing jobs.
I saw a special where a manufacturer described how the process is that they moved employees on a scheduled basis between workstations to help them avoid boredom and stay fresh throughout their workday. Proved to be a Win-Win for everyone. Studies found that alert employees have fewer accidents, which in turn reduces your cost of doing business and raises cash flow and profits.
This means that the more solid leads you have, the greater your chances of making a sale. Solid leads are those contacts engaged in your business, fit your buyer persona, and are at least somewhat motivated to make a purchase or hire your services.
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
- 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.
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 firstname.lastname@example.org
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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.
It goes to the heart of the question of the difference between a customer and a client. Service agreement holders are more likely to be clients who add more value to your construction company because they represent your customer base's most loyal segment.Read More