Psy’s Gangnam Style certainly made a splash last week, culminating with his appearance on the Today Show. Now I see people humming the song or doing his ‘horse dance’ all over the place. It got me to thinking that we all long for a bit of ‘gangnam style’ in our lives. Gangnam style refers to a luxurious lifestyle associated with that area in Seoul, Korea. Don’t all of us long for a bit of luxurious lifestyle? Whether luxury means wealth, time, family, or just happiness to you, we all want a touch of luxury in our lives.
For a small construction company, the luxuries of money and time may be in short supply. As a business owner you no doubt split your time between dealing with customer feedback, accounting, estimating new jobs, managing and directing employees, and even doing some jobs yourself.
My father has been a general contractor for nearly 40 years. I grew up in a house that had various and sundry piles of construction equipment and supplies. Our house was always in a constant state of remodel, and as a teenager, my father made me do my bedroom myself: demoing walls, framing in a new closet, wiring for electrical, cable & telephone, sheetrocking, mudding and taping, and painting and wallpapering. Now that I’m an adult, I recognize the value of those skills. He now specializes in plumbing service and repair, and I make the time to go with him on jobs. I love talking with the customers, but I really like learning how to do things on my own. I’ve installed water heaters, replaced kitchen faucets and snaked main line stoppages (why I had to do it on the day I was wearing white, I don’t know!)
Industry Accounting Experience
In addition to hands-on experience, I’ve been working on my father’s accounting since 2000. When in the office, I handle the following on a day-to-day or monthly basis:
- Customer billing
- Contract billing & progress payments
- Retail store cash receipts
- Daily bank deposits
- Paying bills (Accounts Payable)
- Determine contract pricing
- Employee payroll, payroll tax payments, and benefits administration
- Bank account and credit card reconciliations
- Collections on past-due accounts
I also review all estimates that he writes. Since I understand contractor lingo, I can translate that into language the common homeowner will understand as well. I am able to catch things that he wrote in the contract that he didn’t include in the cost breakdown, and vice versa. I created a spreadsheet some years ago that allows me to break down the cost for each employee so I know what an hour of work truly costs us. That’s much better than basing estimates on just their regular wage, since it includes all taxes, benefits, and even lost time that you pay for, but don’t charge the customer for PER EMPLOYEE.
This is also beneficial when determining pay for new employees. You can see what an employee actually costs, and set their wages accordingly, having a much better idea of how it’s going to impact your profit and bottom line.
I also work with contracts and estimates to create job profitability reports for large jobs both while in progress and upon completion to determine what, if anything went wrong, where, and how much it cost us. Conversely, I can see how much we made on a job, and if we overbid, so we can adjust like jobs in the future.
I also do non-industry related activities that are still crucial to running the business.
- I perform trend analysis, identify peak and off-peak seasons so he can anticipate any future funding needs and secure loans or alternative financing BEFORE it’s needed.
- Review Profit & Loss and Balance Sheets on a regular basis to check for accuracy.
Certified Managerial Accounting – for service industries
Certified Managerial Accountants are traditionally found in the manufacturing industries, but their skills are just as useful in service industries. For example:
- If you need to purchase a large piece of equipment (earth movers, pipe layers, pile drivers, dump trucks, etc), I will perform a cost/value analysis to help you determine a) if the purchase is worth it, b) if you can afford it, c) what the true cost of the purchase will be (factoring in all interest), and d) how long until it has paid for itself.
- As mentioned above, I will help you identify the true cost per job or cost per hour. This will help you analyze whether you are charging enough, and will identify areas for improvement.
- Annual budget preparation with periodic comparisons of how well you did compared to your budget. This can be monthly, quarterly, or even yearly.
- Work with you to determine multi-year projections for the growth of your business, and help you set goals and objectives to meet your goals.
QuickBooks Contractor for Construction
I’m a Certified ProAdvisor for QuickBooks, so I would be remiss in skipping this section. How DOES QuickBooks serve to help the construction industry? Here are some ways.
- QuickBooks allows you to create estimates in their system and easily converts estimates to bills. I personally use a spreadsheet so I can see all my costs, profit margins, overhead, etc, but QuickBooks estimate form will allow you to cover all of these as well.
- Easily track customer payments. If you are doing progress payments for a job, QuickBooks allows for that, and allows you to see real-time balances.
- Invaluable in my father’s business is seeing a customer’s payment history. If they typically take a long time to pay, it’s easy to spot that, and put them on COD, or make other arrangements.
- QuickBooks sends statements and allows for finance charges to be added to customers with outstanding balances.
- My father has a retail store, so we also use QuickBooks POS for the cash register, allow it to track our inventory, and this sync’s up with our QuickBooks in the back office. Without the retail portion, you can still track inventory and bill inventory usage to specific customers or jobs.
- If you incur expenses specific to clients or jobs, such as encroachment permits, building permits, etc, QuickBooks allows you to bill the customer for actual expenses as you enter them to be paid through the bill payment side. VERY HANDY!!
As you can see, there’s a lot of accounting involved in a construction business, and you’re probably not be doing it all. Because you’re not used to doing it, it’s going to take you even longer to do. There is definite benefit to doing it, but it might be best if you hire a professional to handle it so you can focus more on your customers and jobs. This is where I come in. I can do as much or as little of the above as you need. Just give me a call, and we can discuss how I can serve your business. Because I’ve been doing this for so long, it will take me a fraction of the time, and you know you will be getting an experienced accountant to do it, taking the worry and headache away from you.
I really didn’t mean this to be so long, so I apologize and thank you if you stuck with me through the whole thing!