General contracting can be a tricky business to be in. You sometimes have to roll with the punches the economy throws at you. Utilizing bookkeeping for general contractors can lead to great success and help prepare during lean cash flow months. There are a few crucial steps that should be put in place
in order to make sure the bookkeeping system is being used to its maximum capacity. General contracting job size can vary greatly and, as most contractors know, job costing is the backbone to being successful. Anything from building a deck for a small residential house all the way to building a large car dealership needs to be tracked with a great amount of attention to detail.
Know Your Expenses
As a business owner, you need to know your fixed costs. If you don't, you might be priced too low to cover your monthly operating costs and end up posting a loss when you think you should be profitable. Keeping the shop lights on, shop inventory up, and carrying the proper insurance is a major part of any contracting business and overlooking these expenses sink the whole operation. Bottom-line; keep a strong set of books and use them as a stepping stone for pricing yourself and being prepared for bumps in the road. Depending on your business's structure, it may make sense to outsource the bookkeeping to someone that's good at it.
Itemize Your Costs
Time to start holding your employees accountable. This may take a little work, but it's crucial to the longevity of your business. Each purchase made by someone needs to be tied to a job and item cost. The best method for this is the make sure you have an Item List developed and everyone has a copy of it. That way, they can quickly right down a 3 or 4 digit code on the receipt and write the customer it's associated with. These receipts then need to make their way to the bookkeeper, either physically dropped off at the office or passed along via a cloud service.
Enter The Info Properly
Make sure the person entering the info into QuickBooks isn't cutting corners. I don't mean cutting corners in a bookkeeper dishonesty sort of way, but more of a 'this is really complicated so I'll wait until later in the year to worry about it' mentality. If a bookkeeper is not hired yet, then the last thing a contractor wants to do after a long day is sit down and try to do data entry. Although it's crucial, it can easily be ignored. Make sure the bookkeeper is properly trained and is booking the coded transactions to proper job, proper item, and mark it if it's billable. This allows for strong financial comparisons within the Job Costing world. Estimates vs. Actual, Bids vs. Invoices, Revenue vs. Costs, Expenses Not Assigned To Jobs, etc. are just a few reports that are going to be needed on a weekly or monthly basis. Without these reports, you won't be able to identify where you are making or losing money within each job.
Hold Your Payroll Company Accountable
Here is Salt Lake City, we are lucky to have a great amount of payroll companies. That has resulted in lower payroll processing costs and a better overall product. Payroll firms can now not only create great importable files for QuickBooks, but also assigning payroll costs to specific customers/jobs and to the proper item code. Again, this does require some minor 'clerical' work for your employees, but its well worth it in the long run. Once the system is put in place, it's very easy to maintain. Using a CPA firm that doesn't offer this type of payroll service? Finding your current payroll firm doesn't want to work with you on this? Fire them and hire a firm that will, such as IES, Qqest, or Paychex. A majority of these firms are all over the country and don't necessarily need to meet you face to face.
It sounds pretty simplistic, but following these steps can make or break your General
Contracting business. As a business owner, your energy should be focused on utilizing the reports that are generated, and not spent trying to figure out how to generate them. It seems the housing market is starting to turn around and this is usually an indication that the general contracting industry will be rebounding too. Make sure your business is positioned to handle the swings associated with this industry and stay successful no matter what. Like most industries, a strong business has a strong bookkeeper. Let's talk and get a great system put in place.