If you've been a long-time reader or a contracting company owner, you've probably heard about "Cost of Goods Sold" (COGS). But what does it really mean, and why is it crucial for your construction business's success? Understanding COGS isn't just about accounting—it's about making smart decisions for profitability, pricing, and more.    1. What is the Cost of Goods Sold (COGS)?    COGS represents the direct costs of creating the products/services your business sells/provides. These include materials, labor hours, and even manufacturing overheads. Any expense that contributes directly to a product's creation is included in COGS.   COGS provides critical insights into your business's efficiency and profitability. It's a fundamental metric showing how much you spend to produce inventory relative to your sales.   

 Contractors often ask us if they can buy our Chart of Accounts with Cost of Goods Sold and import them into their QuickBooks Desktop or QuickBooks Online file. The answer is yes! We also offer the complete QB Setup Template.

2. What are the components of COGS? 

COGS isn't one-size-fits-all. It includes different types of costs depending on your business. 

Here are the main components typically included in COGS:

• Materials: Raw ingredients or parts used to provide your service
• Payroll: The wages you pay to employees directly involved in production
• Manufacturing Overheads: Indirect costs required to produce services, such as equipment depreciation or utility costs. 

Note 

General overheads, such as office or marketing costs, are not included in COGS—only expenses tied directly to production count. 

3. How do I calculate COGS? 

Fortunately, calculating COGS follows a straightforward formula:

COGS = Beginning inventory + Purchases during the period – Ending inventory 

Breaking it down:

• Beginning inventory: The inventory value on hand at the start of the accounting period. 
• Purchases: All costs for new inventory bought or manufactured during the period. 
• Ending inventory: The value of unsold inventory at the period's end. 

Example Calculation 

Imagine you run a small boutique that sells handmade gifts. If:

• Your beginning inventory is $5,000, 
• You spent $8,000 on materials and production, and 
• Your ending inventory is $2,000, 

Then your COGS would be: 

$5,000 + $8,000 – $2,000 = $11,000 

This $11,000 represents the cost of creating the products you sold during the period. 

But wait - that is for a retail business. Simple. What about construction?

Direct Costs are tied to the jobs (field labor, materials, and other cost items). Office materials (pencils, paper, toner, etc.) are overhead. Yes, an accountant could say these many pencils are used in the field and that notepad is used in the truck. 

The answer is the dividing line of the direct costs to the job: the Costs of Goods Sold (COGS).

That is why we've created our Chart of Accounts, which you can use inside QuickBooks, depending on your type of construction business.

Most COGS accounting methods you will find are for inventory valuation, which is confusing to most contractors.

Confusion always arises about the material. A construction contractor may purchase material and resell it to their customer at cost, thinking it is a reimbursable expense. (You lose money when doing this.)  

Remember, all invoices to the Customer (Retail, General Contractor, Spec Builder, Developer) are income. Washington State has a clear explanation. If the words are on the invoice, then the invoice is either taxable or non-taxable based on other factors. Every line item on a customer invoice is income.  

Purchases for the material are the Cost of Goods Sold or expenses if you are short-cutting your accounting. I have seen financial statements backed out because they will reflect reimbursable income as a negative number, thereby showing it as a deduction. (The net effect is double-dipping on the expense side.) The cause is that the accounting software is not being correctly set up. We fix bad QuickBooks setups for Construction Contractors.

New Construction Home Building is another area of confusion. In the mind of many construction contractors, a Spec home is any new house being built for resale. That is true; it is a New Construction House. The question is on the construction accounting side. For the Owner and Developer (who might be the General Contractor running the job), it is a Spec Home. 

For the General Contractor who is building a New Construction Home for a Developer, it is NOT a Spec Home. Why might it seem the same as both are New Construction Houses? The question to be answered is, "Who owns the house?" - It is a Spec House in the accounting system for THE OWNER.    

If the General Contractor does not own the house, then from the accounting side for that specific General Contractor, the house is a Custom Home with an owner who is not the General Contractor.  

Suppose the General Contractor or developer owns the new house being built. In that case, it is a Spec House in the Accounting System. All costs roll up into WIP (Work-In-Process) and convert to COGS when the house is sold, not before. Recognize expenses when the home sells. Otherwise, expenses one year and sales the next equals taxes.   

In Washington State, all construction contractors working for a spec builder must collect sales tax on all services (labor and material) when billed by the general and trade construction contractors.

In Washington State, all Construction Contractors working on Custom Homes, Residential or Commercial Projects, large or Small Remodels, or Handyman Projects can accept a reseller permit from the General Contractor. The general contractor bills and collects sales tax from the Owner.  

In Washington State, Contractors must collect sales tax on all retail projects, including Labor, Materials, and others. Sales tax must be collected on every line item. Customer Discounts can be given for any reason.

And that is just for one state.

Pro Tip 

Consult with your accountant to identify the best method for your business—tax implications vary by approach. 

4. Why does understanding COGS matter? 

Knowing your COGS is a game-changer for managing and growing your business. Here are some ways it benefits you:

• Profitability analysis - COGS is crucial for calculating gross profit. Subtracting COGS from revenue reveals how much your products contribute to your bottom line. 
• Pricing strategy - Understanding how much a specific project costs allows you to set prices that cover expenses while leaving room for profit. 
• Financial reporting - COGS is necessary for accurate income statements and tax reporting. It also demonstrates operational efficiency, which is key for attracting investors or securing loans. 
• Tax benefits - COGS are deductible, reducing your taxable income. The more precise your calculations, the better-positioned you'll be during tax season. 

5. How can your accountant help 

Managing COGS can be complex, but you don't have to go through it alone. Your accountant is your best ally when navigating this process. 

They can:

• Help you set up your Contractor Chart of Accounts
• Ensure all eligible expenses are accounted for (and not missed!). 
• Revise your tax strategy while staying compliant with regulations. 

One of the most dangerous and difficult steps in setting up the Chart of Accounts is during QuickBooks setup, especially for contract service-based businesses. Get this one thing right, and your QuickBooks for contractors can generate useful financial and job costing reports. If you get it wrong, you will never get useful reports, no matter who handles your contractor's bookkeeping services needs. The reports you do get could lead you to make decisions based on insufficient information that could destroy your entire construction company.

A thought 

Understanding your Cost of Goods Sold isn't just an accounting exercise—it's the foundation for business success. Calculating and tracking COGS effectively will empower you to make better pricing, profitability, and growth decisions. 

Why struggle with numbers when you can partner with someone who lives and breathes construction accounting? Freeing up your time lets you focus on growing your business. You are never too small for us to help, and we can help you begin with your first day in business.   

I am looking forward to being of assistance.  

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 managing 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

 

This Podcast Is Episode 615, And It's About Valuation Beyond Numbers: Enhancing Your Construction Business Worth When valuing a business, most people think straightforwardly about profits. While financial success is undoubtedly critical, it's far from the only factor determining a business's actual worth. Understanding valuation complexities can offer small business owners and entrepreneurs a clear roadmap for sustainable growth and long-term success.   While financial metrics are undoubtedly important, they do not provide a complete picture of a construction company's worth. For contractors and builders, understanding the nuances of business valuation can pave the way for sustainable growth, effective investments, and successful transitions, whether selling the business or attracting stakeholders.   Here is a fresh perspective on what makes a business truly valuable. We'll discuss traditional valuation metrics, the non-financial factors influencing worth, and practical strategies to enhance value.   

The Importance of Business Valuation

Business valuation isn't just for companies preparing for sale or investment. It's a powerful tool that helps you understand your business's health and identify areas for improvement. A valuation gives you insight into whether your construction business is structured for long-term sustainability or is at risk of operational inefficiencies, market challenges, or other pitfalls.

Think of it this way: knowing your business's valuation is like running a health check. It gives you a snapshot of financial health, considers external factors, and ensures your company is ready to tackle challenges or opportunities that come your way. If valuation isn't already part of your business planning, it's time to make it one.

Traditional Valuation Metrics

Traditionally, business valuation has relied heavily on financial metrics. Two commonly known approaches include:

Earnings multipliers

This method involves multiplying a business's annual revenue or profits by a standard industry-specific figure.

Discounted Cash Flow (DCF) Analysis

DCF looks at a business's projected future cash flows and discounts them to present value, providing an estimate that accounts for risk and time. While highly detailed, this method depends heavily on accurate forecasts.

These approaches are undoubtedly helpful but don't tell the whole story. A construction business can be profitable yet fail to secure a high valuation due to overlooked non-financial factors.

Beyond Profits: The non-financial factors that matter

While profits are essential, they're only the beginning of the valuation equation. Non-financial factors can significantly influence how much your business is worth:

1. Market Demand and Competitive Landscape 

It's not just about how much profit you generate today—it's about your position in the market. Is the demand for your product or service growing, or is the market becoming saturated? Are competitors innovating faster than you? A future-proof business consistently assesses market trends and adapts to stay relevant.

Pro Tip: Conduct regular SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to understand your edge in the market.

2. Operational Risks 

Operational risks can make the most profitable contracting business unattractive to potential buyers or investors. For example:

• Does the business rely heavily on an individual owner, a single key employee, or one major customer? 
• Are there documented systems and processes, or does the business suffer from inefficiencies? 

Think of these risks as red flags that could threaten scalability and sustainability.

3. Reputation and Brand Image 

Your brand's reputation isn't just about avoiding bad press—it's a key driver of trust among customers, clients, and partners. Businesses with a loyal customer base and a positive reputation often command higher valuations.

Real-Life Example: A one-person remodeling company with a loyal local following may receive a higher valuation than a larger one with profits but poor customer reviews.

4. Innovation and Adaptability 

How well does your business innovate? Construction businesses that embrace new technologies and methods are typically more resilient. Failure to adapt to changing technologies or market dynamics can cause even profitable enterprises to stall. Businesses that thrive on creativity invest in Research and Development, are ahead of the curve, and demonstrate resilience, which adds immense value during valuation.

Key Question: Is your company actively curious about emerging trends and technologies? 

5. Legal and Regulatory Compliance 

Compliance isn't just about avoiding lawsuits—it's about showing that your business operates responsibly. Construction companies must comply with a myriad of regulations. A solid compliance record can improve a company's valuation by reducing risks related to potential lawsuits or fines. Demonstrating responsible operations assures buyers that your business is trustworthy.

6. Team Strength and Cohesion 

The quality and stability of your workforce can influence valuation. A skilled, experienced, and well-coordinated team enhances productivity and project delivery, making the business more attractive to potential investors or buyers. High employee turnover can signal underlying issues and be a red flag to prospective investors.

Warning Sign: Frequent employee turnover can signal a toxic workplace culture, directly impacting valuation.

Strategies for maximizing business value

To increase valuation, focus on both profitability and these often-overlooked factors:

Diversify revenue streams: Reduce reliance on a single product, service, or client to decrease operational risk. 

Document processes: Streamline workflows and document systems to make the business more scalable.

Build a lasting brand: Invest in customer experience, brand identity, and online presence. A strong brand pays dividends in terms of valuation.

Foster a strong team: To retain top talent, provide training, career development opportunities, and a positive workplace culture.

Stay innovative: Review and refine your business model regularly to meet changing market needs.

The role of innovation, compliance, and team strength

True innovation, regulatory compliance, and a skilled team create a synergy that elevates your business value. These three pillars foster trust and sustainability:

• Innovation keeps you competitive.
• Compliance helps avoid costly legal issues.
• Team strength ensures the knowledge and talent needed for long-term growth.

Final thoughts

Unlock your business's actual value.

Valuing a construction business encompasses much more than simply analyzing profits. To truly understand your company's worth, consider financial and non-financial factors. Focusing on market position, operational efficiency, and innovation can enhance your company's valuation and ensure long-term success in the competitive construction industry.

Valuing a business is never just about profits. Understanding traditional metrics and exploring non-financial factors can position you for long-term success. Whether you're gearing up to sell or want to ensure your construction business thrives, a balanced approach is key.

Want advice to boost your business value? Contact us. We'll help you create a plan tailored to your needs.

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 managing 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

 

This Podcast Is Episode 605, And It's About The Power Of Accurate Job Costing In Your Construction Business Have you ever wondered how successful construction companies accurately price custom projects? The secret is in a method called Job Costing. For small business owners like you, understanding this process could be the key to increasing your profitability and ensuring that every job is priced right.    Welcome to a world where every material, labor, and overhead cost is meticulously tracked to unveil the actual cost of doing business. Let's explore Job Costing, how it works, and how you can leverage it to enhance profitability.   Understanding Job Costing   Job Costing is a way to assign costs to specific jobs or projects. Unlike methods that evenly spread costs, this approach focuses on the details—tracking materials, labor, and overhead for each job. This makes it especially useful for businesses handling custom projects, particularly construction services like remodeling or home building.  

Key Concepts

The key elements of job order costing are direct materials, direct work, and overhead. Direct materials are raw materials used in a project, while direct work involves workers' wages directly tied to the project. Overhead encompasses indirect costs like rent and utilities. Understanding these terms helps you track and allocate expenses accurately.

How Job Costing Works

The process begins by defining the job and assigning it a unique identifier. This helps track all related costs. Next, businesses document materials used, calculate labor costs and apply overhead based on a predetermined rate. Finally, all these costs are summed to determine the total job cost.

Imagine a custom furniture maker tasked with creating a bespoke dining table. The direct materials are wood and varnish, while direct work (staffing) includes the carpenter's hours. Overhead might consist of electricity used during production. The business can accurately price the table by calculating each element, ensuring profitability.

Benefits

Accuracy

Job Costing is all about precision. It helps you avoid guessing and gives you confidence that your prices cover your expenses and help you stay profitable. This accuracy lets you set competitive prices and maintain a healthy bottom line.

Bespoke design

Job Costing is a game-changer for businesses that handle bespoke orders. It allows for detailed cost breakdowns, ensuring each price reflects the actual cost of the custom work. This tailored approach keeps businesses competitive and fair.

Decision making

Understanding the actual cost of each job means making more intelligent decisions. It helps budget, forecast expenses, and identify the most profitable projects. This insight leads to better project selection and pricing strategies. With job order costing, businesses can confidently make informed decisions that positively impact their bottom line.

Challenges and Solutions

Common challenges

Implementing Job Costing involves challenges such as accurate tracking, complex record-keeping, and time consumption. Overhead allocation poses another difficulty, requiring careful consideration to ensure fairness.

You can use strong tracking systems and conduct regular checks to address these challenges. Teaching employees how to manage job order costs well and using software to automate tasks are also helpful.

Real-world examples

Consider a construction company like yours that uses Job Costs to build custom homes. By tracking each material and each labor, they ensure prices reflect actual costs, enhancing profitability.

Lessons learned

These examples show the importance of detailed cost tracking. Accurate records enable businesses to set appropriate prices and understand profitability. By reviewing these insights, companies can make informed decisions that boost their bottom line.

Implementing Job Costing in Your Construction Business

To start using job order costing:

1. Define your jobs clearly and use unique identifiers for tracking.
2. Document all materials and person-hours involved, calculating total costs accurately.
3. Begin with small projects to refine your process.

Better practices

This includes regular audits to ensure accuracy, using technology to streamline processes, and training staff thoroughly.

Much better: Hire or Outsource a Construction Bookkeeper/Accountant.

A material receipt can be coded to any of a dozen or more accounts or item codes depending on whether it is a direct cost, indirect cost, Work-In-Progress, retention, warranty, overhead, administrative, or other expense. Putting costs in the wrong place can be disastrous, like baking a cake and putting in a cup of salt instead of sugar because they both look the same.

Construction accountants think holistically because Job Costing Reports differ from Profit and Loss reports. Job costing reports hardly match any financial reports because economic reports are accumulated vertically, while Job Costing Reports are accumulated horizontally.

Conclusion

Understanding costs is paramount in business. Job Costing is a systematic way to price custom projects in your Construction Business, ensuring profitability and competitiveness. While challenges exist, they are surmountable with the right strategies and tools. Job Costing could be the key to unlocking hidden profits in your business.

Should you need guidance, feel free to reach out. We'll be happy to assist you.

IMPORTANT NOTICE:

Recent changes to the Beneficial Ownership Information reporting requirements may affect your organization. Please thoroughly review these updates to comply with the latest regulations. Also, please pay attention to any deadlines and necessary documentation to maintain compliance.

Starting January 1, 2024, many U.S. businesses must report information about their beneficial owners, i.e., those who own or control the company. Businesses must report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a U.S. Department of the Treasury bureau. The reporting, a requirement of the Corporate Transparency Act (CTA), aims to combat financial crime and corruption and must be completed by January 1, 2025.

Key points about the update:

Who needs to report:

Any company formed or registered in the United States, including:

• Corporations
• Limited Liability Companies (LLCs)
• Limited Partnerships
• Certain trusts

What information needs to be reported:

This includes the legal name, date of birth, and address of each beneficial owner, as well as identifying information like a passport or driver's license number. 

Filing deadline for existing businesses:

Companies formed before January 1, 2024, must file their beneficial ownership information by January 1, 2025. 

Filing deadline for new businesses:

Companies formed in 2024 must file within 90 days of formation. 

Where to file:

Beneficial ownership information must be submitted electronically through FinCEN's BOI E-Filing website. 

Potential consequences of non-compliance: Businesses that fail to comply with the beneficial ownership reporting requirements may face significant civil penalties and possible criminal charges. 

Please go directly to the FinCEN website for more information and answers to Frequently Asked Questions.

Keeping your records current is crucial for adhering to these new requirements. If you have any questions or need further clarification, please contact a legal expert specializing in compliance. We do not offer this service, but please feel free to contact me anytime when you need help with your construction bookkeeping, accounting, and business in general.

Disclaimer: This notice is for informational purposes only and does not constitute legal advice. For specific guidance, please consult with an attorney familiar with the CTA and its regulations.

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 managing 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

This Podcast Is Episode Number 515, And It's About What Every Trade Business Owner Should Know About Raising Prices

Raising prices can be a sore subject. Many construction business owners like you assume doing so will spell the end of your competitiveness. But by not raising prices, you're simply letting inflation and your suppliers' maintenance of your margins quietly eat away at profitability. The bottom line is that costs will always rise long-term - at least with inflation.

That means you have to pass on the costs to your customers or consume those costs yourself to the point where one day, you'll have to either suddenly raise prices or accept the eventual failure of your business.

The worst thing you can do is avoid measuring your costs by sticking your head in the sand. Cost rises will catch up with you eventually, so take action to maintain your margins.

Analyze and reduce your costs

Regularly check the accuracy of the prices you use in your forecasts and break-even calculations. If you're using outdated costs, your predictions could be dangerously off course from the actual performance of your business.

Ideally, you should have your figures analyzed by a professional accountant with experience in the construction industry - and even then, you should remain directly involved to maintain an understanding of your books.

But if that's impossible and you have to make your own costs and margin analysis, try using the following tips to help you resolve any profit issues.

• Analyze costs and profits on an individual product and service level first before looking at the business as a whole. You may miss critical financial details if you try and cut straight to the chase.
• Try making minor, subtle adjustments throughout your range rather than hiking prices on one service, even if the margin on that particular item is the one causing the biggest headache. Sharp, sudden price rises are more likely to attract a long-term adverse reaction from the target market than almost imperceptible ones they can easily accept.
• If you find a loss-making product in your books, don't immediately delete it. Consider first whether it's required to aid sales of profitable services.
• Schedule small price increases every six months or years rather than waiting every few years to raise prices more noticeably.

Increase your prices

If your costs are optimal, look at the other end of your margin - the price.

You may be hesitant to raise prices because you think any price advantage you have over the competition is too significant to lose, but if you give customers more compelling reasons to hire you, you may be able to justify a higher price.

Remember, it's all about positioning. Premium pricing reinforces the value of a premium service. If your market research tells you there's a gap in the market for a value alternative, fill it. But if there's also a gap for a superior choice, take that option if you can deliver a product or service to the required standards.

Why? Put simply; there's always someone willing to go cheaper. Look at how large shopping outlets use their buying power to find ultra-cheap stock and take customers away from smaller businesses with tighter margins.

Many small business owners take it as gospel that the last thing they should do is raise prices, but the opposite is true more often than not.

Just make sure that if you do raise your prices, you do so:

• At a fair pace and intervals instead of raising prices in a way that will shock the market
• With consideration of the market's price tolerance

Alter your product or service mix

Any two margins are rarely the same in a range of products, so why focus equally on selling them all if concentrating on the higher-margin products will increase your income?

If costs and pricing are optimal, altering your product mix is the only way to maintain or increase your margins.

This means being ruthless and chopping products or services that may be close to your heart to focus instead on those that bring people in through the doors.

Look at your margins, pick the top earners, and focus your marketing efforts on promoting these products and services above the others.

Pricing Feasibility

Your prices must be set to cover your costs and provide you with a healthy margin, but they also need to be developed considering your target market's tolerance for pricing. If you don't do this, you could price yourself out of the market or underestimate the value of your products or services.

You'll be tempted to let your competitors dictate your pricing, but you need to build a comprehensive pricing strategy that reflects the value of your product and the price your market might be willing to pay for it.

Carry out market research

Finding out the price expectations of your target market may be as easy as simply asking them. The key is to get an accurate idea of your offering's value before you enter the market. The best way to do that is by directly talking to your target market. Conduct surveys or, if you already have a working product prototype or service concept, form a focus group to gain their instinctive responses and opinions on how much value they'd place on your offering.

Ask them:

• The price they'd expect to pay for a product or service like yours.
• Where else do they buy, and why.
• What typically influences their purchasing decisions (you may find competitive pricing isn't as crucial as you expected).

Remember that the prices you choose must reflect your position in the marketplace if you want your brand to thrive.

At the end of the process, you need to know the following:

• Whether your service needs to compete directly on price or whether it's innovative enough to charge a premium for.
• The maximum price ceiling the target market will tolerate.

Consider test marketing

If you struggle to estimate your market's price tolerance, consider releasing your service on a small, limited scale as part of a test marketing exercise.

You'll be able to get direct, valuable feedback from customers on what they think about your product or service and its pricing.

Assess costs and margins

Once you know your target market's price expectations, you can start looking at the feasibility of meeting them.

Assess your cost and supplier options, and produce financial forecasts that could give you a long-term view of profitability.

A cash flow forecast will give you a clear idea of the possible return on investment you could expect, while a break-even calculation will estimate the minimum performance (in units sold or hours) you'd need to meet before you start making a profit.

These forecasts will be critical to your strategic decisions. Consult an accountant to make sure you've accounted for all your costs.

Use your forecasts to answer these questions:

• Will the return on investment be worth your while?
• Can you trim your costs to improving your margins?
• Should you consider a more premium pricing strategy to improve your margins?

Final thoughts

While it may seem scary, remember that your job is to keep prices fair for you and your clients. That means you must charge fees that work for you and allow you to remain operational. It's just good business sense. Whatever the case, research and review your prices often to ensure you position your trade business correctly.

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 managing 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

 

 

This Podcast Is Episode Number 514, And It's About How To Attract Profitable Construction Clients

 

This Podcast Is Episode Number 513, And It's About Seven Ways Your Construction Business Can Market Its Services

When you go into business as a tradesperson, you often focus on performing your trade to the best of your ability – as it should be. With time, the quality of your work will speak for itself, which is the most valuable testimonial of all.

Before the internet was commercially available, just as many experts advised contractors about the layout and design of yellow page ads and which books to spend money on, I say you spend money because that is what it was - Marketing.

Many of us who owned and operated construction companies spent thousands of dollars on these experts. Based on their recommendations, we spent tens of thousands of dollars annually in full-page yellow page ads as close to the first position.

Spending Money Is Easy, Investing Money Takes Work

However, any trades accountant or bookkeeper will tell you there's more to it now. While your good reputation preceding you is undoubtedly essential, there are a few other ways that you'll want to market your services to ensure that you have a steady stream of work. Read on to learn seven paths you can market your construction business.

1. Appear in directories

Since setting up a new business is usually a digital experience, it's easy to overlook the step of making sure you appear on a physical list where people can find you. Ensure your trade business is on relevant trade directories in your area.

Additionally, make sure you appear in the online equivalent. Yelp, Google, and Facebook each have business directories. And let's not forget the old standby: the phone book. Yes, they still exist! They are valuable resources for some people looking to hire a tradesperson.

2. Have a website

Some website-building platforms are very user-friendly, but hire someone if you feel that's beyond you. Almost everyone does an online search before they hire a business, and not having a website is like waving a giant flag that says you're out of touch, old-fashioned, or possibly not legitimate. Meanwhile, having a website reassures people that you are who you say you are and can provide the services they need. 

3. Leverage social media

Nothing is more substantial than a good referral, and people naturally turn to social media to find out what your customers are saying if they don't know someone who's used your services personally.

Keep your social media presence strong and engaged. If you're uncomfortable doing this, hire someone to do it for you. It's critical when doing business today.

4. Offer referral promotions

When you wind up with a happy client, give them an easy way to speak positively about you and suggest you to their friends. A card or a thank-you email with a discount code will do the trick.

5. Run ads

Construction marketing can be tricky because, typically, your services aren't always needed. But when you are required, it's usually urgent. 

If your trade business doesn't appear on the first page of Google, it might be worth your while to take out an online ad. That way, when someone searches for a tradesperson in your area, your business will appear next to their search. The only way someone can click on your information is if they see it – so make sure they have that chance, whether through an organic search or a paid ad.

6. Make yourself visible in the real world

Make sure your construction business's name and logo appear on any equipment you use, and make clothes for your team to wear when they're out and about.

It may be smaller than a billboard, but driving and walking around letting people know who you are, what you do, and how to contact you will go a long way to marketing your company. If people become familiar with your business name, they'll likely turn to you when needed. 

7. Good old-fashioned snail mail

Believe it or not, print campaigns are alive and well! If you operate a construction business whose services are sorely needed in a specific area, consider making a print ad to pop into mailboxes. A word of warning, though – make sure your print ad is relevant, valuable, and eye-catching. You don't want to spend money producing something that will immediately go to the recycling bin.

Final Thoughts

Marketing for trade businesses is a lot like any other type of business in that you have to understand your audience and their needs and show up when they're looking for you. With some research and proactive planning, you can be sure your business will appear in the right place and time.

Continually examine your approach. Instead of yellow pages people, I see many well-intentioned people with their minds and hearts in the right place that have great ideas on what works and fails in social media. I certainly don't know what works for every contractor; however, I do know that every construction company is unique, and what works for your competitor may not work for you.

I encourage you to develop your market tracking system along with these methods. Perhaps you will discover what works best for your construction company and increase your sales bottom line profits. If I can be of service, don't hesitate to contact me.

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 managing 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

 

This Podcast Is Episode Number 512, And It's About Understanding Cultural Differences Within Your Company And Clients   We're in a dynamic, multicultural country with many different races of people from diverse origins, just within the domestic market; it's vital that you know who might be interested in your goods or services and how they could perceive particular messages.

Whichever specialty your construction business is in, cultural differences can directly impact your profitability. If you try to understand your crew's and clients' cultures – their customs and differences – you'll have a better chance of keeping them and gaining more, respectively.   Suppliers, vendors, and service providers respect leaders who have a vision, mindful and considerate, and can power through every obstacle to achieve success. They will support you in ways you cannot even imagine because it is in their best interest. Decide how you want to lead, how you want to be respected, and the work culture you want to create.  

Ensure certain business areas don't offend potential subcontractors and clients from different cultures.

• Body language – it's important to know what body language to communicate to potential staff or clients you meet or in visual advertising directed at your customers. For example, if your business has a sizable Indian customer segment, be aware that a typical western hand wave meaning 'hello' is usually interpreted by Indians as 'go away' or 'no.'
  
  
• Communication – the secret to success in any business. If your company can communicate on the same level as your local customers, you're already heading in the right direction. One example that failed miserably was when PepsiCo marketed Pepsi in Taiwan using an ad tagline, "Come alive with Pepsi!" They didn't realize the Chinese translation meant, "Pepsi brings your ancestors back from the dead!"
  
  
• Awareness – simply being aware of your prospective customers' cultural backgrounds will allow your business to convey its messages more accurately and with less chance of offending.

By drawing up some personas of the main types of clients in your target market, you'll begin to break down what each kind of personal values. You may even find their trigger points – those that make the purchase.

Ensure you're familiar with each persona:

• Etiquette – such as getting to know the culture of Chinese customers and being patient when conducting business.

• Dress – if you have significant customers in the Pacific Islands, it's more common to dress informally when doing business.
  
  
• Business and religious customs – familiarity can go a long way toward a successful business. For example, Japanese people consider it rude to make demands when doing business, while Indonesian people prefer to do business face-to-face.
  
  
• History – if you're kicking off an advertising campaign that uses an aspect of history to get your message across, make sure it's accurate and not likely to offend a particular demographic.

Simple acts of mindfulness promote a positive reputation for your construction company. One common example: When working on residential projects, it is important to note that Asians, in general, and most Eastern Europeans, dislike wearing outdoor footwear inside their houses. It is customary to remove your shoes or wear shoe covers to show respect as you enter; not only that, it ensures the floors and carpets are clean and clear of possible mud and dirt.

Often businesses don't take sufficient time to have people on the ground interacting with their potential customers. There are language barriers and different customs that need to be considered.

Speaking with advisers who have the exact origins of your major market segments is a brilliant idea. The advice could prove invaluable – ensuring you don't offend through ignorance or lack of knowledge.

You must ensure all aspects of your marketing work together, delivering the same message – one that's aware of the cultural differences amongst your clients. By being aware of the critical factors impacting your business, you'll set yourself up to maximize sales from a global melting pot of potential customers.

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 managing 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

This Podcast Is Episode Number 511, And It's About The Difference Between A Construction Accountant And A Tax Accountant

How often have you hired someone with the expectation that they know how construction works, and then you found out they did not know about it? You are a master in the construction industry, so you recognize what to look for in your particular field and quickly observe if someone has the skillsets, and you proceed accordingly.

You know what happens when you send your best Rough Carpenter that you pay piece work for framing spec from the ground up in all kinds of weather and working conditions to install some custom-made cherry wood cabinets with gold plated pulls and knobs in the home of your best client (who happens to be in the wealthiest neighborhood in your town). It is not a pretty sight.

Have you pictured a crew with muddy work gear and boots stepping onto your client's pristine floors? The dirty secret is that Tax Accountants operate like Rough Carpenters because they work fast and furious, and they are paid piece work. The main difference is that they earn the bulk of their annual income in three and a half months. This means they do not waste time going through your receipts to ensure you get all the deductions you are entitled to.

 

Both Groups Are Important, And Each One Fills A Need

Project Management Construction Accounting Professionals (PMP) work above the line and focus on generating positive outcomes and results for contractors:

• Increase Sales
• Reduces Expenses
• Increase Net Income

Certified Public Accountants (CPA) work below the line focused on filling out annual income tax forms, ensuring contractors pay their fair share of taxes, preparing certified financial statements, and performing audits on your QuickBooks contractor file. 

Three Times Construction Contractors Need A CPA In Their QuickBooks For Contractors File:

• You apply for a large loan or line of credit over a million dollars
• You need certified financial statements to get a performance bond
• Your construction company is so large that you are required to have an annual audit

Most construction contractors with annual sales under $10,000,000 and less than 20 employees will never have those issues.

Preparing end-of-year reports and filing taxes can be complicated. If you're not doing it right, you could be liable for penalties or, at the very least, not take advantage of tax gains and financial opportunities. A Construction Accountant can ensure your business remains compliant (and pay as little tax as possible), help you analyze your business performance, and work with you to achieve your goals.

On the other hand, Tax Accountants can kill more cash flow and profit in your construction business (in less than an hour) by preparing your annual tax return using a messed up QuickBooks file than you can make up for with hard work in several months, if not years. This is because saving you money on your tax bill is not what they are paid to do; they are paid to fill out tax returns.

Why does it need to be separate?

Trust but verify! When you need financing, most bankers and finance sources like to see a separation of duties. They want to see two different firms involved because it reduces the chance of errors, collusion, cover-up, and fraud. They may not say a word to you; however, we often hear about it!

We insist our construction contractor clients use an outside CPA or tax preparer to review the QuickBooks Contractor's bookkeeping services that we have performed and prepare the annual income tax return. As a result, we have developed good working relationships with several CPA firms and yearly qualified tax preparers.

It is good to know our contractor clients trust us and know that we have their best interest in our minds and hearts; however, we are human, make mistakes, and welcome input from CPAs and tax preparers. It is all about teamwork and people working together to ensure everything in your construction accounting system works correctly.

Bottomline: Construction Accountants should not be preparing annual tax returns because nobody can serve two masters. Either be a Tax Accountant and serve the interests of the tax collection agencies or be a Construction Accountant and serve the interests of contractors.

Please don't think we are too hard on Tax Accountants. Understand that we have great relationships with them. We have had Tax Accountants review our QuickBooks and prepare our business and personal returns for over thirty years, and we refer many businesses to various Tax Accounting and Preparation companies.

What you need to look for is someone who is experienced, capable, and understanding. You should feel they'll be a good advisor and are interested in developing a long-term professional relationship with you.

Having the right Construction Accountant for your business leaves you free to focus on why you started the construction company in the first place – to see it grow and become profitable. A Construction Accountant and a Tax Accountant are integral to this because they'll keep your finances on track. Which, in the end, is the whole point.

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 managing 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

 

This Podcast Is Episode Number 510, And It's About How To Protect Yourself And Your Construction Business From Fraud Unfortunately, fraudsters are out there. They want your money and identity, and they're getting more sophisticated. There's a wealth of opportunity for swindlers to take advantage of people because so much of what we do is now online. There are ways for you to protect yourself, both by taking action and being aware of what's going on. 

While they might get less information from a small business, thieves will easily access it. If your construction company keeps any time-sensitive information on a computer network—personal information, credit card details, or other vital data—you need to ensure your cybersecurity is top-notch so you, your business, and your clients are fully protected.    As a small construction business owner, you may not have the significant security budget of a large company, but you can combat employee theft and protect yourself from financial losses if you can identify red flags and follow suitable preventive measures.   

Here are eight ways to protect yourself from personal and construction business financial fraud.

1. Protect your identity

Getting someone's identity is often the first step to running up enormous charges in their name. Scary as it is, you can go bankrupt if someone opens credit cards using your ID and maxes them out before you know anything has happened.

Shred your mail and dispose of records securely. Dispose of any documents with your name or other information carefully. It may take extra time, but these small steps can save you a world of headaches.

2. Don't click on unknown links

Whether sent to you in an email or via text message – don't click! It's a popular tactic for fraudsters to send a normal-looking link that's harmful. Before you know it, you're freely giving away your information. Just don't do it. Instead, take the extra step to visit a website through its legitimate homepage or call customer service if you suspect a link is a scam.

3. Check your bills

With so many bills offered online, it's easy to forget to review them. Make sure to check your statements for accuracy every month. It's the only way to identify fraudulent charges and correct them.

4. Don't put your personal information online carelessly

Think of this like putting the toothpaste back in the tube – it just can't be done once you've squeezed it out. The same goes for putting your personal information online. Fraudsters can use something as innocuous as your birthdate or workplace to verify your identity and expose you to financial fraud.

5. Never give up information over email or on the phone

The pandemic made us especially susceptible to being taken advantage of because so much was changing at once. Extra government programs were in place, vaccination campaigns were underway, and this administration meant more phone calls, text reminders, and emails.

Trustworthy institutions typically do not ask for your personal information in these ways. If you get a suspicious phone call or email, hang up and call them directly. That extra step can save you a lot of money and stress. It's too easy to fall victim to one of these scams, especially if the caller claims that a loved one is in trouble and needs help – a common tactic these days.

6. Be cautious when shopping online

Fraudsters are getting savvy when it comes to tricking us online. It's not uncommon for a fraudulent website to appear exactly like a legitimate place to shop. Double-check web addresses and question deals that seem good to be true.

Be aware of spelling mistakes or awkward grammar on these websites. They're often a giveaway that it's a lookalike designed to trick you into handing over your information.

7. Check your credit report periodically

If you live in a region where you can get free credit reports that don't harm your credit score, take advantage of this from time to time. It's an excellent way to know if loans have been opened in your name or to be alerted to any other suspicious activity.

8. Set spending limits on your credit and debit cards

Most cards can be set up to alert you of purchases, and you can set the parameters of when that happens. If someone has your credit card information, it's not uncommon for them to run through several smaller purchases as a sort of test to see if you're paying attention. Set up spending alerts so you can stop them in their tracks.

A Note on Construction Bookkeeping Embezzlement/Employee Fraud

Bad Bookkeepers will leave you with unfiled and unpaid taxes. They come from every race, creed, color, gender, and age. There is no definitive profile or absolute way to know which contractor bookkeeper is an embezzler until they have been caught and convicted, and even then, if you do not perform extensive background checks, you may never know it until it is too late.

Just because you catch a bookkeeper embezzling funds, don't think for one minute that they will always be punished and made to pay you back. For the most part, you must understand that employees are poor innocent victims of brutal greedy business owners in the eyes of the public.

I have seen bad bookkeepers ruin too many businesses, especially construction businesses. In most cases, it was Bookkeeper Incompetence or Bookkeeper Embezzlement, and in other cases, it appears there may have been some deliberate identity theft; however, I cannot be sure.

What you can do:

Monitor your financial records closely, and investigate if you come across the following discrepancies:

Mismatched payees: the name on a cashed check doesn't match the name entered in the general ledger

Identical payments:  two checks have cleared for the same amount to different vendors in the same date range; one may have been authorized on the strength of supporting documentation for the legitimate payment.

Questionable companies: a supplier or vendor with unprofessional invoices (i.e., apparent errors, a missing or incorrect address, home address, or non-existent web presence)

FEA Cybersecurity

As an accounting firm, our client's privacy and security remain our top priorities, and we are continually looking at ways to develop and evaluate our system to prevent a breach and network holes. We utilize 128-bit Secure Socket Layer encryption, which ensures that all data passed between the web server and browsers remain private and integral. There are two levels of restrictions, and passwords must be entered before you can get your data file.

At Fast Easy Accounting, Cloud Security is not an option- it is a fundamental requirement. We only use Intuit Approved Commercial Hosting Services. Their Cloud Security rests on U.S.-based servers, backups, data centers, and technical support. Not one aspect of our Cloud Security relies on outsourced services or offshore locations. We have taken steps to select the best to ensure that your data is as secure as that found for online banking and financial institutions.

Final thoughts

It's a big, connected world, but modern technology has also made us more susceptible to fraud. However, with a few good habits and suitable tools and practices, you can protect yourself from personal fraud and continue enjoying online life's conveniences.

Let this post be a reminder to watch for suspicious employee behavior. Segregate financial roles so no one has unlimited access, control, or opportunity - and ensure your bookkeeping is always up to date so any "red flag" scenarios can be dealt with promptly.

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 managing 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

This Podcast Is Episode Number 509, And It's About Growing Your Construction Company Through Collaboration And Partnership

Operating and growing your construction business requires more than functional and skilled employees, but it's an excellent start. You need a steady stream of quality, paying clients to keep your company afloat. Likewise, deciding on an online marketing plan can be overwhelming for company owners like you who are looking for affordable ways to nurture consistent, sustainable growth. With time in short supply, the key is to find one or two growth strategies that will get results at a minimal cost.

Building a construction business requires collaboration and partnership. The deployment of employees in a way that allows them to work together to problem-solve and act with a shared sense of urgency; and increasing brand awareness through an alliance with people in the industry are simple, cost-effective ideas for building your company within, in the office or job site, or externally through referral and online connections.

When this occurs, you and your crew come to leverage the strengths of one another as you work to achieve shared objectives vital to your company's growth. Also, mutual learning occurs, increasing the probability that each employee's performance will evolve from good to better and then best. In turn, a construction company's performance improves as well.

Collaboration

As collaboration occurs, your team can leverage individual differences to produce exceptional outcomes. This knowledge-sharing creates a learning enterprise in which employees more readily identify solutions to problems. Consequently, your construction company may become more operationally and financially successful.

A collaborative environment makes a range of disciplines accessible on an as-needed basis, which leads to the efficient use of employee talent in a way that isn't possible otherwise. It allows your crew to complete a task at hand, making it more likely that the right talent is available at the right time. With collaboration, jobs are done more efficiently, leaving more time for the staff to concentrate on activities that contribute to company growth.

A group brings different perspectives to a problem at hand. As individuals share their views, each team member considers issues from multiple viewpoints, and the person begins to think like the group. The culture change contributes to new thinking, which may lead to new plans and ideas to deliver your services. In addition, diverse and complementary talent may enhance individual work processes as each of your employees becomes a part of a greater whole, which can positively affect your construction company's culture.

A team succeeds or fails according to the combined capabilities and commitment of the individuals involved. Deploying a variety of unique strengths and skills advances a team's understanding of a problem, leading to faster problem scoping and solution formulation and more effective solutions.

Partnership

This simple growth hack is influential both on and offline. A partnership with a company that provides complementary products or services can quickly increase your online email lists and boost your sales figures.

There are many ways a business partnership could work – you might negotiate a joint venture, host an event where you promote each other's products, run a giveaway together or launch a combined product or service.

It doesn't have to be a formal business partnership, but reach out to businesses in complementary industries to suggest a referral relationship in which you refer relevant clients to each other. You could also agree to partner up on specific projects. For example, a kitchen remodeler and a flooring contractor could refer clients to each other or work together on projects requiring both skills. 

Keep in mind, though, joint ventures are a bit like change orders. They can be an incredible opportunity to make or lose money very quickly. So, forming partnerships doesn't necessarily mean a business merger but more on providing customized help to a client that needs a range of solutions.

Final thoughts

Remember, communicating better is one of the most accessible and valuable skills you can learn if you look for ways to lead and collaborate more effectively. Effective communication will help you to gain the trust and respect of individuals around you, which is one of the most valuable assets you can acquire.

Collaboration is also an effective means of problem-solving because it allows a company to leverage individual employee differences, evaluate employee efforts in the aggregate and create a learning enterprise. When problems are solved more readily, resources become available to achieve other company objectives, including company growth.

Collaborating and forming partnerships are more impactful when you have written goals of what you want to accomplish and how much income you want to generate from all your efforts. I can help provide additional financial advice and support as you update your business plan based on your intentions and current financial records. 

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 managing 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

 

This Podcast Is Episode Number 508, And It's About Seven Tips To Help Your Construction Business Adjust For Inflation Inflation has ballooned worldwide in recent months, and there's no question that small construction businesses are feeling the pinch. Supplies cost more, employees are hard to find, and your profits are shrinking.

This can lead to operating at a loss - spending more money than you make. Otherwise, you will eventually run out of cash reserves and be out of business. And while it's not uncommon, especially for new companies, it's still not ideal and shouldn't continue in the long term.   Be aware of what's going on in your industry and adjust. Customers judge a business based on perceived value. If you're at the bottom of the pack price-wise, they're likely to skip over you to get a good deal. Price yourself accordingly to attract quality clients.  

It's undoubtedly challenging, but you can weather the storm with the following tips.

1. Study your data

You first need to identify why you're operating at a loss. If you're still in the start-up phase, you might not need to worry too much as long as you've got enough cash to meet your costs. But if the losses are due to a decline in sales, then it's time to review your construction business and, if necessary, get professional help.

Your numbers are always helpful, but in times of rapid inflation, you'll be incredibly thankful that you keep a nice, clean set of books. Analyze your data to learn what products and services make you the most money, which ones cost the most to offer, and to identify where you can save.

2. Cut expenses

Now that you've identified where you can save money, go ahead and cut what you can. It's nice to be able to offer many products and services, but this is a time to tighten your belt.

Focus on the items that keep your business as healthy as possible, and ditch the rest – at least for the time being. It's okay to simplify, especially when times are tough.

3. Adjust your prices

Nobody likes to raise their prices, but you likely have no choice. Keeping fees the same would indeed be fantastic for your customers or clients. However, if you're offering your products or services at the same prices as before inflation started to climb rapidly, you're absorbing the cost.

When you dig into your data, you may find that some things you offer actually cost you a lot of money. That's not a sustainable business model – raise your prices to keep yourself afloat. You should always seek to raise your rates over time to improve your profit margins and keep up with inflation.

4. Simplify and automate

If aspects of your business take a long time to complete, see if there's anything you can do to reduce those hours. Switching to cloud accounting or inventory management software would be an excellent example, as doing so would allow you to use your valuable time elsewhere.

Identify where you can simplify and automate, and then do it. Then, even when inflation comes back under control, you will undoubtedly find that the saved time helps.

You can build efficient systems by streamlining your processes and using technology. There might be administrative tasks that you can ditch altogether. 

5. Focus on your client

Remember that your clients are keeping you in business and experiencing inflation in their lives too – both at home and in their businesses.

Keep the lines of communication clear and open, especially if you're going to alter your offerings or raise your prices. It's easier to retain loyal customers than to gain new ones, so make sure they know how much you value them and communicate openly to maintain their trust and loyalty.

6. Consider your employees

Good help is hard to find. Those who work for you are feeling the pinch as well. While it's essential to automate what you can, you must consider the consequences it will have on your staff. Identify how you can better use their talents if parts of their roles become automated.

7. Remember, this will pass

Inflation has happened before and will undoubtedly happen again after this. Historically, periods of inflation last anywhere from a few months to several years. However, we remember one thing: all periods of inflation end. 

Final thoughts

While inflation is problematic for small businesses, there are steps you can take to reduce its impact. You will leave this inflationary period intact with clear communication and intelligent adjustments. Focus on what you can control and face what you can't with confidence and creativity.

It's also important to review your practices honestly and carefully to pinpoint what you can improve in your construction business during this challenging period. Being proactive with your marketing, asking for an expert's help with your accounting, and putting a plan in place for production are necessary to operate and grow your company during this time.

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 managing 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

This Podcast Is Episode Number 507, And It's About Starting And Operating A Small Construction Business On Limited Funds

So you have a great business idea and are convinced you can make it work, but you don't have much capital to get your business off the ground. Juggling existing financial commitments such as a mortgage or bank loan could put a squeeze on your business plans. Many entrepreneurs use creative thinking and shrewd planning to get businesses off the ground with the smallest budgets.

Freelancers in all industries deal with the same problems due to the nature of their work. Most of you came from the skilled craftsman trades; some worked as construction company managers and have now started or thought of starting your business.
 
If you just did, congratulations, you have decided to own and operate a construction company. Practically, solo contractors manage every aspect of their business, but we are here to help you navigate it. Here are the things you need to consider (especially when you are on a limited budget) to keep it running.

Making your construction business fit your finances

Starting your company on the tiniest of budgets means working harder to ensure your business doesn't implode from a lack of funds. Even if you don't have funds, you probably have something that many established companies don't have - time. You can build income and cash flow from your hard work if you have time.

Remember that the easiest businesses to get off the ground with limited capital don't require plenty of resources or initial outlay. These are generally service-based businesses, such as handyperson and residential home-improvement services.

Minimizing costs and eliminating expenses

It goes without saying that if you have a limited budget, you will need to direct your spending where it has the most significant impact on your business. Here are some tips to make your money go further.

• Harness free business support. Business support or advice doesn't need to cost a fortune – there are plenty of ways to get help and build your knowledge for free. Use the Internet to research success stories in your chosen industry and find out if there are any government business mentoring services you could access. You could also approach your network of friends and family or industry associations to put you in touch with someone in your industry who could share their knowledge. 
• Do it yourself. Almost any business task can be completed by yourself, depending on how much spare time you have. If you don't have the design budget for an expensive-looking website or are unsure how to design advertising material, consider learning how to do it yourself. For example, you might be able to attend a free or low-cost course on how to use design software or use Internet resources to teach yourself. 
• Work from home or lease low cost. Working from home can be a great option; you don't need to meet clients at your premises, as most will invite you to their property. If you need a physical office to meet clients, leasing a room in a shared office or splitting the lease on a property with another business is an excellent way to minimize costs. Shared office spaces often have shared amenities such as meeting rooms and coffee break areas, which are great for meeting clients.
• Order only what you need. Avoid the temptation to order large quantities of stock from suppliers in anticipation of large orders. Less supply means you save on storage costs and reduce the risk of theft or damage. The downside is that you may have to pay more for items, lowering your margins, but you can order in bulk once the business is booming.
• Minimize fixed costs. The more fixed costs you have, you are financially tied down. Some fixed costs like power and telephone line rental can't be avoided, but other costs such as transport costs or office supplies will vary each month. Think carefully before financially committing to services that may not be necessary, such as expensive mobile data plans or a private mailbox.
• Use free or cloud-based software. Rather than paying for bundles of software, download software off the Internet instead. A variety of websites offer free word processing software, accounting platforms, and budgeting tools, either as a limited-time trial or completely free. There are also free or low-cost cloud-based versions of many commonly used programs. Cloud-based programs are stored on the Internet, so they don't require as much processing speed or physical space as those stored on your computer's hard drive.
• Use social media as a marketing tool. Creating a Facebook or Instagram account is free and provides you with a platform to market your business to your local community. Facebook also features a low-cost paid advertising feature you could use to drive potential customers to your pages. Social media pages can also be a free substitute for a website until you have enough money to create your own. You will need a significant online presence to gain customers and generate sales through social media, which takes time.

Directing profits back into your business

It may have taken a lot of hard work and determination, but you are now making sales. Spending money on yourself or some new gadget to reward your persistence is tempting. Avoid splashing out unless it will make a big difference to your business by improving productivity or operational capacity. It's generally best to put the money straight back into growing the backbone of your business – either by purchasing a piece of essential equipment or growing your client list.

Know when to spend

Like any start-up business, there will be times when you need to make big decisions, such as pursuing expansion opportunities or new markets. You might need to spend most (or even all) of your savings or consider borrowing to take advantage of new opportunities.

Final thoughts

Many aspiring to self-employment do not have any idea what freelancing entails. Contracting services to homeowners or individuals require lots of time and effort to earn a profit immediately. Employees tired of their own work lives idealize those of business owners and often ignore the difficulties faced in this environment. Before counting on notions of optimal freelancing experience, consider your own life, strengths, and abilities. Ask yourself these questions: "Am I ready to begin a long-term career in contractor work?" and "What do I want to achieve through my contracting business?" 

f you are a new, struggling construction business owner, tackling these problems from the bottom up streamlines the path to success. If you ever become discouraged, remember that everyone starts at the beginning and that you can achieve your desired level of success if you put in the work to attain it. Again, you are not alone. Let me know how I can help you today by filling out the form on the right.

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 managing 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

 

This Podcast Is Episode Number 506, And It's About The Advantages Of Paperless Payroll In Your Construction Company

When you think of payroll, you might still envision paperwork and envelopes given to employees by hand. Even with direct deposit being the norm for years, there is still a significant paper component to manage.

You won't find a contractor using inefficient tools on the job site these days. The hammer or the nail gun? No question. While every contractor recognizes the flaws of using ineffective tools, they may still be losing money due to inefficient payroll tools and processes.

As with most things, payroll is going digital – for a good reason. There are many benefits to digital payroll for construction business owners and staff alike. Read on to learn why switching to paperless payroll could be right for you.

1. It empowers your construction employees

Your employees can log in to the system and access anything they need – anytime and anywhere. Pay stubs, hours worked, and so much more. It's all right there, which means they don't need to call or visit a specific department for help. If they have questions about time off or sick days, they can easily find that information. 

When everyone can access what they need, it makes everything easier. It also means that whoever would traditionally have to pause what they're doing to provide information can stay on task.

2. It increases convenience and eliminates delays

When you're manually processing your payroll, delays come up that are a normal part of the contracting business. But that isn't the case when you take your payroll digital.

Because everything runs automatically, you no longer experience holdups due to holidays or slow mail. Additionally, everything is distributed instantly online, meaning everyone gets paid on time.

You'll reduce the chance of mistakes as well. Taking human error out of the equation means you no longer have to spend much time correcting mistakes or investigating what went wrong.

3. It keeps everything secure

Security is built right into paperless payroll systems. Employees have a unique username and encrypted password, which they use to access a secure online portal. Some even have two-factor verification.

All payment information is kept securely on the portal, accessible only to those with permission. With all data stored online, you reduce the risk of losing sensitive documents. You also don't have to worry about shredding confidential information. The risk of fraud is also nearly eliminated.

4. It saves you money, and valuable time

There are obvious cost savings in reducing the paper, postage, ink, and toner required to distribute paper pay stubs. Those costs are high, too. But you will see the most significant savings in the hours no longer needed to run your payroll.

With most of the process automated, it's no longer necessary to spend time tallying up hours worked, calculating overtime and sick pay, and then sorting out taxes. Instead, your software will take care of it for you.

5. It helps the environment

Finally, paperless payroll is nearly waste-free. You'll no longer produce stacks of paper, envelopes, and supporting documents, which add up in filing cabinets all over your office – which is only a pitstop before they're discarded.

Payroll Processing Not Fun? Outsource it!

• Having trouble processing payroll?
• Do employees ever turn in timecards late?
• Any difficulty keeping track of employee loans?
• Does keeping track of garnishments take lots of time?

Wouldn't it be great to get rid of payroll processing?

We understand construction companies and their payroll needs because we have owned and operated construction and service/repair plumbing companies for over 25 years, which means we know how to get payroll processed fast and quickly!

Everything runs smoothly during your regular pay schedule when timecards arrive on time. When employees do not turn in their timecards on schedule and expect you to have their checks ready, no worries, we have you covered:

• Process payroll outside your normal pay schedule - fast and easy
• Track and allocate garnishments
• Track and report on employee loans
• Track and information on employee reimbursements
• Everything for one flat fee and no long-term contract 

Final thoughts

There are several benefits to adopting paperless payroll, and it's a popular system for employees and employers alike. When considering taking your payroll paperless, ask yourself what the needs of your business and your employees are. If both would enjoy the features listed above, it might be time to start thinking about making the switch.

Outsource your payroll processing to save time and money. Reach out to me at your earliest convenience.

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 managing 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

This Podcast Is Episode 604, And It's About Stop Chasing Payments - How To Streamline Your Construction Receivables Running a small construction business is a constant juggle, and managing your receivables is one of the more frustrating tasks. How often have you been waiting on overdue invoices? Do you have enough cash flow to cover next month's expenses? If this sounds familiar, you're not alone. Many small business owners need help keeping their accounts receivable in check, which can ultimately impact their business's health and sustainability.   This guide will provide practical steps to streamline your invoicing process, confidently approach past-due invoices, and ensure steady cash flow.   Understanding the importance of timely invoicing   Timely invoicing is more than just good business practice; it's critical to maintaining a healthy cash flow. When invoices go unpaid, your cash flow takes a hit, potentially affecting your ability to pay suppliers, cover payroll, or invest in growth opportunities. By sending invoices promptly, you lay the foundation for timely payments.   Studies show that businesses that practice timely invoicing and set clear payment terms see fewer delays and disputes.  

Setting clear payment terms and policies

You need crystal-clear payment terms and policies to avoid confusion and ensure your clients understand their obligations. These should be outlined in every contract and reiterated on every invoice. Here are some essential components to consider:

• Due dates: Clearly state when payment is due, whether upon receipt, net 30, or another timeframe.
• Late fees: Specify any penalties for late payments, such as interest or a flat fee. This encourages prompt payment and offsets the cost of delays.
• Payment methods: Offer several payment options, such as bank transfers, credit cards, and digital wallets, to make it convenient for clients to pay.

Having these terms laid out upfront will reduce misunderstandings and set expectations.

Leveraging invoicing tools and templates

Gone are the days of manual invoicing and spreadsheet tracking. Today, there are numerous invoicing software options that can automate and streamline your billing process. These tools offer templates that ensure consistency and professionalism.

Tools like QuickBooks and Xero allow you to automate invoice generation and send reminders, and they integrate with your accounting systems. The result? Less time spent on paperwork and more time focusing on your business.

Strategies for collecting past-due invoices

Let's face it: Chasing overdue invoices is a task few enjoy. However, it's essential for your cash flow. Here's how to approach it:

• Polite reminders: Start with a friendly reminder email shortly after the due date. Acknowledge that oversights happen and provide an easy way for them to pay.
• Follow-up calls: Don't hesitate to pick up the phone if emails go unanswered. Sometimes, a personal touch is all it takes to resolve the issue.
• Overdue statements: Send a statement outlining all overdue invoices and any applicable late fees. This formal documentation can prompt action.

Remember, consistency is critical. Establish a routine for following up on overdue invoices and stick to it.

Offering incentives and payment options

Offering incentives can encourage timely payments. Consider providing a small discount for early payment, an attractive option for clients looking to save a little cash. Additionally, the flexibility of multiple payment methods can remove barriers to prompt payment.

For instance, offering an early bird discount of 2% for payments made within 10 days can motivate clients to pay sooner rather than later.

Understanding outstanding vs. past due invoices

It's crucial to distinguish between outstanding (not yet due) invoices and past-due invoices. Outstanding invoices are simply payments expected at a future date and don't require immediate action. On the other hand, past-due invoices have missed the agreed payment date and need your attention.

Managing these categories effectively saves resources on invoices that still need follow-up.

Managing receivables efficiently is vital for small business success. By implementing the strategies above, you can reduce time spent chasing payments and improve your cash flow. This sense of accomplishment in effectively managing your receivables can empower you and contribute to your business's success. Remember, the goal is to create a seamless process that encourages timely payments and reduces disputes.

Acknowledging the need for construction bookkeeping help is crucial to enhancing your company's financial health. Managing a wide range of projects can become overwhelming as a contractor, especially when keeping track of expenses, invoices, and payroll. By seeking professional bookkeeping assistance, you will streamline your financial processes and free up time to focus on what you do best—building and growing your business. This relief from the burden of financial management can bring a sense of control and peace of mind.

If managing your receivables becomes overwhelming, consider enlisting a professional bookkeeper or accountant specializing in construction finances. We can help with your invoices, expenses, payroll, and financial reporting, allowing you to focus on your primary business activities.

Final thoughts

By recognizing the importance of effective bookkeeping, you position your construction business to receive blessings through profits and build a solid foundation for longevity and success.

As we reflect on the joy and warmth of being with family and friends yesterday, I want to take a moment to express our heartfelt gratitude to every one of you. Thank you for being part of our business journey. Spending time with loved ones and sharing a meal reminds us of the importance of connection and community.

I am sincerely thankful for our business relationship and the mutual growth in the construction industry, which enriches our daily lives. Let's carry this spirit of gratitude into the days ahead, finding opportunities to appreciate the little things and support one another.

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 managing 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

 

This Podcast Is Episode Number 505, And It's About Setting Construction Business Financial Goals For 2023 The new year is a natural time to decide what you want to achieve and how. Businesses tend to progress more consistently if the owner sets financial goals and makes a plan to achieve them.    Your construction business (and personal) budget is one area where you should keep your resolutions from slipping. While it’s true that there’s also next year when it comes to your financial goals, putting it off has real consequences that equal less money and more work. So here are seven steps you should take in January to start your 2023 budget.  

1. Review and evaluate your 2022 goals

You’ve got to see where you’re coming from to know where you can realistically go. At year’s end, review the goals you set last year and use your numbers to see how your business measured up.

Whether or not you met your goals, that information is valuable. What circumstances enabled you to meet your goals or prevented you from doing so? If you didn’t make a formal list last year, try to think of where you were a year ago and see if you progressed as much as you thought you would.

2. Use that information to set your 2023 goals

Now that you know how far you came in 2022, jot down what you’d like to accomplish in 2023. Don’t worry about getting specific here – it’s just a jumping-off point. Try to be ambitious without being unreasonable. Setting unreachable goals only sets you up for disappointment and a feeling of failure, which is entirely counterproductive.

3. Get specific

Flesh out your ideas by paying attention to the details. Use real numbers in your goals. Are you going to make more sales? Raise prices? Find new clients? Outline exactly how you’re going to get to these numbers. The more specific you can be here, the better. It will help you to make your dreams a reality.

4. Sort your goals into categories

Once your goals are outlined and detailed, look at them. Some plans are small and quickly achievable. These are fantastic ones to tackle early in the new year to boost your business and get you on the right track. Plan to get to these as soon as possible so you can reap the rewards.

There should be some items on your goal list that will take more time, effort, and planning. Break these bigger goals into smaller steps, and create a timeline for achieving each milestone.

You will likely have a handful of goals that fall somewhere in between. Distribute these evenly throughout the year in a way that makes sense for your business.

5. Break down the steps in each goal

With your short, medium, and long-term goals laid out, go over them with a critical eye. You need to ensure that each one has a clear set of steps to help you achieve it, especially if it is a bigger or more complicated goal.

Create milestones for each one of your goals, with what you need to accomplish broken down into manageable chunks. A complex goal may even require weekly targets to help you get to the finish line.

After finishing this step, you’ll have a detailed picture of what the year looks like for your construction business. What was once daunting becomes exciting! If you’ve balanced things out well, you’re likely to gain a feeling of accomplishment when you look at this goal map and will be keen to get things underway.

6. Check that each goal is SMART

Most of us are familiar with the concept of SMART goals, but we don’t always take the time to make sure they pass this check. Go over your goals to ensure that each is specific, measurable, attainable, relevant (or realistic), and timely. If each goal meets these requirements, you’re good to go!

7. Set reminders to check in each quarter

Accountability is key. Set up dedicated time at least once per quarter to review your progress. If you find that you’re falling behind, make a plan at that time to get things back on track.

Final thoughts

Most construction business owners have an idea of what they want to achieve each new year, but the only way to make those dreams a reality is to plan, plan, plan. It’s the best way to make sure your ambitions come to pass. After that, check in on your project regularly.

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 managing 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

This Podcast Is Episode Number 504, And It's About Year-end Closing And Planning For Construction Business Owners

The end of the year is typically a reflective time. Something about that lull between holiday festivities and New Year's Eve sets the stage for introspection and review. While you're busy reflecting on the year ending and making plans for the new one about to begin, make sure you take some time to consider your finances. 

Preparing your End of Financial Year (EOFY) information often feels stressful—there are receipts to sort out and reports to review. You must ensure you have all the necessary information about your income and expenses. It can be overwhelming, and it can make the EOFY feel daunting.

The end of the financial year isn't just a time to collect receipts and find invoices. It's also a time to reflect on how your past year went, what went well and what didn't, and what you can change for next year.

Here are three tips to make the most of your end-of-financial year:

1. Consider redoing your files

One of the most overwhelming parts of the end of the financial year is finding all the invoices, receipts, and reports you need to file your taxes correctly. Pay attention to how easy it was—or wasn't—to find what you needed this past year.

Did you have to search 15 different places for all your receipts? Did you have a combination of online and physical invoices? Did you have clearly labeled folders for everything? Did you leave everything for the last minute?

If you found yourself searching high and low for every piece of paper you needed, you might want to consider revising your paperwork, so it's easier and less time-consuming to manage.

Can you keep track of everything through software and apps? Is there technology or equipment that can help you? Is it worth investing in a filing cabinet?

The effort you put now into sorting your paperwork will pay off hugely every year when you can quickly and easily find all the information you need. Let's face it; you'll come up against the end of the financial year every year, so you may as well be systematic about it.

2. Reflect on your year

The end of the financial year is a perfect time to reflect on how the past year went. Celebrate the big successes, but remember to focus on other victories. Even if you didn't meet your financial targets, did you survive a particularly tough year? Did you manage to pivot your construction business and try a new model? Did you take some risks and learn from them? Did you grow your business or expand your offerings?

It's great to have goals for each year and celebrate when you achieve them, but it's also important to look at where things didn't go according to plan and how you grew from those situations. You may need to refine your business plan if you're not meeting your financial targets or rethink how you arrive at your goals in the first place.

Do this before you start planning the year so you can revise your strategies in the future.

3. Plan for the future

Now that you've reflected on what went well and what went sideways, you can better plan for next year. Research upcoming events and schedule your marketing calendar. Plan to address slow times or busy periods. If you didn't meet your financial targets last year, either change how you set your goals or your strategies for achieving them.

Many retailers offer significant discounts at the end of the financial year. Does it make sense for you to make a purchase right now? Should you buy new equipment, technology, or other goods now? It may be worth it if you have the money to do so and need those items.

Although the end of the financial year can feel stressful, it's also a fantastic time to reflect on the past year and celebrate your achievements.

You can take the time to plan and incorporate the lessons you learned from the past year to make the upcoming year your most successful.

If you made your goals, that's great! If they fell by the wayside, look at what you could have done differently. Or, take some time to set a more manageable goal to get that sense of accomplishment next December.

Construction is a tricky business, and people's failure is common. Most of our clients and people who reached out have failed or come very close.

Very close doesn't mean failure because it doesn't matter how many times you are knocked down; it only matters that you learn your lessons, get up and go again.

This coming January, it's time to hit that reset button or, better yet, start again no matter what day of the month, no matter where you are in your construction company journey.

I chat with contractors like you every day. You tell me your stories. About your challenges in running a business, keeping up with the bookwork (accounting and bookkeeping). About estimating and bidding jobs, doing the work and collections from clients, having (or not having) employees, and paying their taxes.

Talk to your clients (or reach out to your previous ones) about their needs, too. Ask them how their habits have changed, what projects they're looking forward to this new year, and the challenges they're facing or, most likely, will need to address in the coming months - roof replacement, bathroom remodeling, renovation budget concerns.

Construction is what makes civilization and a civilized society possible. Because of the commitment of people like you to step out of your comfort zone and start a construction company and work it, we owe you all an outstanding debt of gratitude.

Thank you for working hard through these past few years when most of us are hunkered down, choosing to continue your service, and maintaining our homes, businesses, and community.

May this New Year bring you joy, hope, prosperity, and love.

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 managing 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

 

This Podcast Is Episode Number 503, And It's About Reclaiming Your Time And Switching Off During The Holidays

Small construction company owners like you already have a time-consuming and challenging job running your business. If you're working on weekdays, you usually need the weekend to catch up on paperwork, pay bills, and manage any tasks you didn't get to during the week. 

But this weekend is Christmas, and with it comes time to relax, focus on family and friends and take stock of what is essential in life. Phone calls from employees dealing with a minor crisis will pull your focus from your family, or your Christmas dinner will be taken over by business talk. Like the merry bells of Christmas, your cell phone will constantly chime with the sounds of urgent text messages and emails that must be dealt with. Clients will need your attention.

So, if you've been waiting for a sign or permission to pause, this post could be the one you're waiting for. It's easy to let the construction company take over your personal life, but as a small business owner, it's vital that you get some time away from work.

Here are some tips for helping you switch off during the holidays.

1. Shut down entirely for the week

If your business can be shut down for a week, consider closing from Christmas to New Year. Your employees will love the time off, and you won't be

Small construction company owners like you already have a time-consuming and challenging job running your business. If you're working on weekdays, you usually need the weekend to catch up on paperwork, pay bills, and manage any tasks you didn't get to during the week. 

But this weekend is Christmas, and with it comes time to relax, focus on family and friends and take stock of what is essential in life. Phone calls from employees dealing with a minor crisis will pull your focus from your family, or your Christmas dinner will be taken over by business talk. Like the merry bells of Christmas, your cell phone will constantly chime with the sounds of urgent text messages and emails that must be dealt with. Clients will need your attention.

So, if you've been waiting for a sign or permission to pause, this post could be the one you're waiting for. It's easy to let the construction company take over your personal life, but as a small business owner, it's vital that you get some time away from work.

Here are some tips for helping you switch off during the holidays.

1. Shut down entirely for the week

If your business can be shut down for a week, consider closing from Christmas to New Year. Your employees will love the time off, and you won't be bothered by urgent texts about something that went wrong at the office. This time is generally not as productive for workers, as they all want to get home, be with loved ones, and celebrate the season.

Just make sure you give your clients some notice that you're closing up. Good clients will respect your decision and even encourage it.

2. Have someone trained to deal with your absence

A big headache for small business owners is constant calls from employees who can't carry out basic tasks or make decisions. If you plan on taking time off but are leaving the business open, have someone senior available to answer questions or take over duties other employees can't.

Ensure employees are prepared for situations that could arise but can fix on their own. Can they use someone else's computer if theirs dies? If a client calls with a crisis, which staff members can handle each situation?

Assign one or two people—not you—to contact people in case staff needs assistance and give those two people strict instructions about when they can contact you. You don't need phone calls on your days off because someone doesn't know how to work the coffee machine.

3. Resist the urge to plan meetings during this time

When a client comes to you just before you take your days off and requests a meeting over the holidays, it can be difficult to resist that urge. That meeting, however, will take up time and space in your brain aside from the actual meeting time. You'll prepare for it, think about it, and plan what to say. If the meeting doesn't go well, it will affect the rest of your days off.

Instead, push the meeting until after the holidays. Unless the situation is dire, an extra week won't hurt. Or ask another worker to attend the session for you.

The key here is to delegate the tasks you don't need to do.

As a construction business owner, you have regular duties that need to be done but could be better done by an expert. Doing them yourself takes up a ton of your time. Look at your tasks and determine which ones are eating up your valuable time. Virtual assistants can now be hired to handle general customer service on your behalf. Could you hire a bookkeeper? An accountant?

Regardless of your current situation, if you need help, we can tailor a plan to fit your budget and your construction bookkeeping needs. 

You will not know whether it is a good idea until we chat. One thing is for sure - hiring outside service providers costs money, but we are worth the expense when you consider the time and energy you'll save by not taking on that tedious bookkeeping tasks. Especially when you factor in the extra personal time you'll have.

We have options for your business accounting, whether you would like to outsource or do it yourself. Let's figure out a way to free some of your time and get your life back, be with your family and loved ones, and increase your cash flow and earnings while improving your quality of life and relationships.

Final thoughts

If you're taking time over the holidays, really take time. Don't take time off but then spend that time constantly checking for work-related texts and emails or attending meetings. Put your cell phone away. Stop checking your email. Set an outgoing email that lets people know when you'll respond to their messages, and change your voicemail to note your days off. That way, you can rest, relax, and enjoy your break. Your overall well-being is necessary to you, your business, and your community. You'll need this time to restore your energy for January.

I end this by wishing you a Merry Christmas and Best Wishes of Joy this Holiday Season. Enjoy. Be Glad. Be Joyful and maybe a little sad. But try to find something to be happy and grateful for each day. What matters most are our family, friends, and loved ones - those we celebrate with, those we can't be with, and those who are with us in spirit.

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 managing 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

 

 

This Podcast Is Episode Number 502, And It's About How To Prevent Your Construction Company's Yearly Cycle Of Chaos

The year is almost over. Fourth-quarter and year-end deadlines are approaching. Most construction business owners who reach out to us describe this as their "Year End Madness" to prepare their documents for the tax accountant. 

The end of the year tends to be chaotic for construction company owners, but it's an excellent time to get some extra housekeeping done for your business. If you're on QuickBooks, you can click the Help Menu; depending on the year and version you're using, you can access the Year-End Guide, which will show you how to wrap up your business year. It's not an easy process, but it's all worth it. 

Why? Because tax preparers will take what you give them - they don't have the time, and it's much work that you've paid for, but a good tax preparer will know how much you can save if you can track your money. Bottomline - pay your taxes right, but it doesn't have to be more than what you owe.

Since you have a few weeks left for December's statements, ensure everything from November back to January 1st is reconciled. Here are also a few things to catch up on:

1. Review your goals and Key Performance Indicators

A lot has likely happened for your construction business over the previous 11 months. The end of the year is the perfect time to look back and see how your performance is stacked against your goals.

Consider your KPIs and review how you did. Be honest with yourself. If you didn't make your goals, that's okay. Now you can look at what went wrong–or right–and adjust accordingly. Were there surprises that affected your business? Could you prepare more for slower times? Did you take on too much all at once?

If you met or exceeded your goals, take some time to celebrate the achievements.

2. Review your business plan

Seeing how reality compares to your original business plan is always surprising. Allow yourself to evaluate how you're doing and see if your construction business is becoming what you hoped it would.

If it isn't, ask yourself if your goals and vision have changed or if you haven't been focused enough on them. It's okay to adapt your dream as your business evolves and you understand the market better, but make sure the change is one you intend to make, not one that's happened unconsciously.

3. Reconcile accounts receivable

Unpaid invoices are often one of the biggest disruptors to cash flow. Check if you have any outstanding accounts and remind those clients to settle before the year ends. It also doesn't hurt to double-check if you have any amounts owing to your suppliers and pay those.

4. Catch up on expenses

This is especially important if the end of the calendar year also marks the end of the tax year in your location (as I would like to remind our readers from outside North America), but it's a good practice for anyone. Ensure you've accounted for any eligible business expenses by year's end to stay up to date for tax season.

5. Verify vendor or client information

You already know that your business has changed for the year. The same is true for all the other companies that you work with. Take some time to ensure you have their correct information and are aware of any changes to their business terms.

6. Review subscriptions

It's easy to let subscriptions fly under the radar, but they quickly add up. Review your active subscriptions and cancel any that aren't relevant anymore. It's easy to get more money in your pocket, and it's fun to choose some new ones for the new year that better meet your needs.

7. Send out year-end letters

Put together a year-end letter for customers or clients and another for employees.

Let your clients know what you've been up to over the year, share some of your milestones, and let them know how much you appreciate their business. Highlight any community events that your business was a part of. It's an excellent way to stay in touch and keep yourself fresh in their mind for when they may need your services in the new year.

Thank your employees for all their hard work over the year. Call attention to your successes and celebrate all that you've achieved. It's a great way to provide recognition and highlight the most important events of the year.

8. Consider end-of-year gifts or bonuses

The end of the year is a terrific time to reward employees for a job well done. Even if you have an established bonus program, it's always nice to surprise employees with a gift. It's a personal way to say thank you and tell them how much you appreciate them.

Final thoughts

The end of the year is notoriously busy, and the holidays make it even harder to get things done. However, it's a great time to reflect on and celebrate your accomplishments. You'll be glad you did when the new year rolls around, and you feel like you've wrapped the year up in a bow – ready to take on the next one with a sense of renewal.

If you are still asking yourself the $64,000 questions: What about this and that? Have I met my goals for this year? What should I do for the balance of this year? What are my plans for the start of next year? Should I start now? Should I wait? I can't decide! - It is time to start fixing those loose ends now! The reports are only as good as the data received. Contact me to discuss your needs. If you don't know the answers tell me as much as you can, and I will do my best to "fill in the blanks."

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 managing 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

 

 

This Podcast Is Episode Number 501, And It's About Key Drivers To Improve Construction Profitability And Cash Flow

Enlightened contractors like you understand the value of developing your own unique Construction Contracting System, a collection of documented repeatable processes and operation manuals. The key is continuously refining your construction company's practices and procedures.

Your office ensures your contracting company has a steady flow of projects. Proper accounting and bookkeeping develop timely financial reports to show which jobs are profitable so you can pursue more. Thus, you can focus more on the following:

• Acquiring the right clients
• Doing the project as close to on time and budget as possible
• Get job deposits and timely progress payments
• Follow-up with clients to monitor satisfaction and line up new projects

Boost profitability by recognizing your key drivers

Identifying the key drivers of your business is critical to boosting profitability. A key 'driver' significantly impacts your specific construction business's performance.

A whole range of factors can affect the performance of every business. The secret is to focus on a handful of drivers that:

• Affect the performance of your business significantly
• Are measurable
• Can be compared to a benchmark, such as last year's figures or an industry average
• Can be acted upon

Make use of benchmarking

Use past figures as a benchmark for current performance. Figures for last year or last quarter provide hard facts and established patterns that expose potential problems and opportunities.

Also, compare your construction business with other similar companies, especially competitors. Your accountant, bank manager, or industry association may be able to supply industry benchmarks.

What are some of the key drivers in business?

Critical drivers vary from business to business, and in construction businesses, they include:

• Sales lead in capital goods or service
• Market share where only the biggest will survive
• 'First-time fix' in a maintenance business

Even direct competitors may have different drivers. A prime location is not a key driver for a floor installation business, but it is for a brick-and-mortar competitor that relies on a well-located retail store if they sell hardwood flooring and carpet and provide installation services.

Some of the following drivers might be relevant to your business:

1. Converting leads into sales

The number of leads (information requests or quotes given) provides early warning of any peaks or downturns in your sales. If you have an established leads-to-sales conversion ratio and know the size of an average sale, you can use the pace of leads to forecast sales.

Monitoring sales figures can show:

 - Which categories of products are selling well

- What each salesperson has achieved

- If lead conversion rates are improving

- Keep your costs under control

Maintaining a healthy gross profit margin is critical. If your gross margin percentage is falling, take swift corrective action. The causes could include higher input prices, a changing product mix, production inefficiencies, or excessive discounting.

If you run a service business that bills out time, it can be helpful to treat consultants' salaries as a variable rather than overhead costs because this makes it easier to work out who is making you money.

2. Collecting receivables efficiently

Your accounts receivable collection period (the number of days on average to collect customer payments) is an important driver to monitor. Try to improve your past performance and at least match the industry standard.

If the standard is 35 days, and you take 45 days on average to receive customer payments, then improve your collection activities immediately. Bill promptly and highlight overdue payments for prompt action.

The key is consistency – late payers should know that you'll unfailingly contact them.

3. Optimal inventory levels

Your inventory turnover rate is the ratio of cost-of-sales to inventory. Most businesses aim for a high inventory turnover rate because it indicates an efficient use of capital resources. If the ratio decreases, find out why.

For example, you may be overbuying or purchasing inventory you cannot sell. The more you can break down your inventory figures into separate product categories, the easier it will be to pinpoint problems.

4. Hours billed

An interior designing firm had a disappointing level of monthly sales for years until the owners realized that hours billed per consultant per week was the key driver.

Once they began monitoring this, they could see which consultants were earning the revenue. The firm could then target small and manageable improvements – such as billing 30 minutes more a day each. Attitudes changed overnight, and sales increased significantly.

5. Turning over staff

A plumbing company recognized that staff turnover was their driver. A skilled plumber with sales experience was three times more productive than a new recruit. The recruitment and training process for new salespeople also significantly burdened the business.

The plumbing company introduced a long-term incentive into salary packages to reduce staff turnover. It also introduced quarterly performance reviews.

6. Defective/Wrong goods

A painting supply and service business found that the defect ratio was a driver. Defects or wrong paint color led to goods being returned, extra time wasted on rework, delays in payment, and lower profit for the business. The company reorganized the workforce into 'quality cells,' and productivity increased significantly.

Identifying the five key drivers you need to focus on

What key factors enable your small construction business to outperform its competitors? Try to identify the five key drivers you need to focus on.

The questions you need to ask yourself are:

• What drives the sales figures?
• What drives the costs?
• What drives the cash flow?

Final thoughts

By optimizing these Key Drivers, successful contractors understand how and why the construction business cycle works. Cost is what you see; the profit potential is what you don't see. High-profit construction company owners focus on both and understand that "It Takes Money To Make Money."

Next Steps: What gets measured gets managed. After learning your key drivers, it's time to understand your reports and use them to your advantage.

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Discover insightful lessons with actionable tips for your bookkeeping processes with our Five Key Performance Indicators online course. Get your reports done with our "Five At 5 For 5" approach and improved practices.

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 managing 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

This Podcast Is Episode Number 500, And It's About Cost-Reduction Strategies For Construction Company Owners

Cutting costs can be a quick and easy way to improve the profitability of your construction business. Introducing cost-control measures can bring immediate savings and ensure you remain profitable in the long term.

But cost-control measures must be carefully managed. Eliminating errant expenses is beneficial, but indiscriminate cost-cutting could lead to a drop in quality or poor morale if staff fear being made redundant or are not given the tools they need to do their job efficiently.

This risk is heavily reduced by identifying where you can safely trim costs, setting clear cost-reduction targets, and researching any cost-saving initiatives before making changes to your contracting business.

Planning for effective cost-control

The first step towards reducing costs is identifying your major cost areas. These are likely to include:

• Production
• Purchasing
• Sales and marketing
• Financing
• Administration
• Facilities maintenance

1. Profit and Loss

Start by assessing your profit and loss statement for the last six months and rank all your expenses from highest to lowest, working your way down the list and identifying areas where you can reduce costs. It's a good idea to first focus on identifying cost-saving measures in places where you'll see the most significant return. For example, it's wise to work toward saving 5% on a $200,000 expense rather than a slightly higher percentage on a lower-cost expense.

2. Try new ideas

You might find it challenging to anticipate savings without implementing new systems and processes. Remember that any changes you make don't need to be permanent. If you aren't sure if a cost-saving measure is suitable for your business, consider trying it for a few months and then assessing the results. This way, you'll know the actual cost savings without committing long-term to new processes or changes.

Any new processes or systems should be benchmarked and frequently revisited to ensure they are still suitable for your business. Consider asking staff for feedback around any changes to confirm that no hidden problems could cost you more than the cost-saving value.

If you are in doubt about any potential changes, consider seeking professional advice from an accountant, industry association, or business mentor.

3. Quick savings

You might be surprised that significant savings can be made without worrying about your quality and affecting performance. Here are the most popular ways to trim costs without making radical changes.

• Eliminate unnecessary costs – start with waste reduction, heating costs, and utility charges.
• Reduce inefficiency by identifying manual tasks that could be computerized or completed less frequently.
• Avoid frequent, small orders that cost more than larger orders and take additional time to complete.
• Reduce travel expenses by booking air travel earlier and using cheaper accommodations on business trips.
• Find alternatives to high-priced suppliers or negotiate better payment terms or discounts on purchased goods.
• Revise your credit policies to encourage prompt payment.
• Brainstorm immediate cost savings with your staff – they might have some valuable suggestions you may have overlooked.

4. Significant savings

Once you have identified your major cost areas, you may want to investigate potential ways to save money by changing existing processes.

Some of the most common opportunities are listed below, but before adopting any changes, you should be aware of any potential damage to your core business activities.

• Cut payroll costs by outsourcing non-essential activities.
• Redesign your existing processes to eliminate duplication and cut time wastage.
• Make use of current technology or the latest industry innovation.
• Agree to long-term supply contracts, or guarantee a minimum purchase amount to secure better terms.
• Trim back or revise your current product offering and remove poor-performing products.
• Form strategic alliances with other businesses to buy larger volumes.
• Consider subletting office space or relocating to a more cost-efficient location.

There may also be other costs, such as long-term, fixed-rate business loans or fixed-price contracts for raw materials, that you may be able to reduce when these are up for renewal or tender.

Pitfalls to avoid

Reducing costs can have a negative effect, so you'll need to be sure that changes will not compromise your operational performance.

Some common pitfalls include:

• Over-dependence on one supplier could put you at risk if your supplier fails.
• Reducing your marketing budget could affect your marketing strategy.
• Tighter control of business finances could leave you without a safety margin if cash flow becomes tight.
• Cutting short-term costs such as training, research, development, or advertising can lead to long-term weaknesses.

Employee costs

Reducing employee-related costs is generally risky and counterproductive in the long term. Reducing costs such as staff training or meeting times could lead to poor staff morale and reduced productivity.

Making employees redundant could bring short-term costs and the risk of possible employment proceedings. It may also contribute to low morale. Changing an employee's terms and conditions can also create legal issues in some circumstances, so it's always a good idea to get expert advice before making a decision.

These problems can be minimized by maintaining clear communication with employees. Introducing cost-saving through improved practices and procedures will require a degree of employee 'buy-in' so your employees know why you are making changes. Employees may need additional training and support over these periods.

Next steps

• Schedule a staff meeting to review your costs and brainstorm possible saving measures.
• Commit to an ongoing cost-control and monitoring process (or delegate to key staff to manage the process).
• Ask your accountant to assist you with cost-saving initiatives or brainstorm ideas.

Final thoughts

Every small construction business owner knows how challenging it is to cut down expenses without somehow compromising internal or external quality. Regardless of your business's nature, the first step to reducing your overhead costs is to take the time to go through every single expense you have -assess which ones are necessary for your business to operate smoothly, what can be trimmed down, and what can be eliminated.

It's important not to rest on your laurels. Continually thinking of ways to reduce your overheads is essential for a healthy cash flow, so conducting regular reviews of your business expenses should be a routine task.

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 managing 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

This Podcast Is Episode Number 499, And It's About Construction Company Employee Vs. Contractor - What You Need To Know

Depending on the nature of your construction business, you may have workers who are employees or contractors, or you may have both. Each has its merits, but it's important to review which are to meet your tax obligations.

With so much discussion about employees, payroll, and payroll taxes, you may feel like missing out by not hiring many employees. The reality is that as a small business owner, you do not have to hire employees.

To hire or not to hire employees is one of the few optional things where the business owner can choose, change their mind, and change direction as needed.

When you have an employee, you must withhold income tax and report on additional benefits. Contractors generally look after their tax obligations.

Is there another way?

Yes - to outsource most of the mundane low-value tasks that take time away from what you are skilled in. As the owner, you can use that time to meet with clients, create estimates, collect money, pay bills, and have a little left over.

It's against the law to treat an employee as a contractor. Significant penalties apply if you do, so it's essential to get it right.

The simplest way to remember is:

An employee works in your business and is part of your business.

A contractor is running their own business.

But how can you be sure that you've got an employee or a contractor on your hands, especially with remote work blurring the lines between employees and contractors?

Does it come to the point that you should be hiring a worker as an employee when you thought they were a contractor?

There are six factors to consider:

1. Ability to subcontract or delegate

An employee is not able to subcontract or delegate the work. They must perform the outlined tasks themselves. If they can't do the work themselves for any reason, say a prolonged illness, and someone else does it, this is a substitution. Your business would then pay the other person to carry out those activities.

A contractor can delegate the work as long as they're not obligated to do it themselves per the contract. If your contractor didn't work, they would arrange for another qualified person to do it. You would pay your contractor, who would then pay their subcontractor.

2. Basis of payment

An employee is paid a set amount per period. The most obvious example would be an annual salary or hourly wage.

Some employees are paid piece-work rates. They receive an amount per successful sale or per the number of pieces produced. A commission basis would be a price-per-item structure.

A contractor, however, is paid an agreed-upon price in exchange for a predetermined result. Some contracts may specify the amount to be paid in increments as stages of the project are completed. But the key takeaway is that a contractor is paid when the agreed-upon result is achieved.

3. Equipment, tools, and other assets

If your business is responsible for providing the equipment, tools, and other assets required to perform the job, that's characteristic of an employee.

If the worker is providing these items, they are likely a contractor.

4. Commercial risks

Employees do not bear the commercial risk and are not liable for correcting any defects in the work at their own expense. Instead, your business takes this responsibility. The worker will be paid for the time required to complete the task.

A contractor assumes commercial risk. They are responsible for fixing any mistakes on their own time. Your business does not have to pay for any extra time taken or materials used unless otherwise specified in the contract. This additional work would fall under the umbrella of the terms set at the beginning of the project.

5. Control over the work

Employees have to complete the work the way the employer specifies. What work is done, where it's done, how it's done, and when it's done are all up to the employer. The employee then completes the work as required.

Contractors are not subject to the same rules. They decide when and how the work is done, so long as it meets the obligations laid out in the contract. For example, a contractor could work three 10-hour days rather than four 8-hour days to complete a job.

6. Independence

An employee works within a business. They complete tasks as required until they leave the job.

A contractor operates independently and may have other contracts with other companies. They can freely accept and refuse other work. Their obligation is complete when they deliver the specified outcome.

Final thoughts

Don't add staff just to have staff. Employees are expensive. In Washington State, it is mandatory to offer Family Leave and PTO. Family Leave is similar to State Unemployment which is calculated on gross wages. PTO (Personal Time Off) is at a rate of 1 hour per every 40 worked. The employee can use the time off anytime they want – no notice given) Other benefits may include paid vacation and holidays.

Most construction company owners like you are doing what they can to survive and thrive in tough economic times, and we are here to support and hopefully help you stay out of trouble where we can.

It can be confusing to determine between an employee and a contractor, but it's crucial that you do so to meet your tax obligations and play by the rules. Contact us to learn more about your tax obligations for employees and contractors.

P.S.

Here's a Promo Code that you can use in both our Fast Easy Accounting Store and Construction Accounting Academy for a 40% Discount:

CONTRACTOR40

You can use it today, November 25, up to Sunday, November 27, 2022, at 11:59 PM. (Please note: Offer does not apply to Outsourced Accounting, Bookkeeping Review, or any Consultation and Training products; you can use it, however, to purchase any course or monthly subscription classes in Construction Accounting Academy).

For questions, suggestions, or comments, email me at sharie@fasteasyaccounting.com or call me at 800-361-1770 or 206-361-3950.

I look forward to helping you with your business goals.

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 managing 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

This Podcast Is Episode Number 498, And It's About The Solution To Your Construction Company Equipment Dilemma

Is it time for your construction business to invest in some new equipment? And if so, is it a more brilliant business decision and cost-effective to rent or buy?

Black Friday, followed by Cyber Monday, is coming. The real question is what equipment is on your business shopping list. It is all a question of your budget, income, cash flow, profit & loss, and taxes.

Why you might need new equipment:

• The right equipment can enhance your processes, productivity, innovation capacity, and bottom line, but should you buy now or wait till a later date?
• A few reasons you might need to purchase new equipment now are because:
  - You have some big contracts coming up and need to increase production.
  - Your construction business is expanding at a fast rate.
  - You need to replace some aging equipment to maintain your business’s high standards and keep up with the competition.

Evaluate your existing financial state

It can be easy to get caught up in the growth of your business without putting the necessary time into assessing whether you’re financially ready to buy some more equipment.

Try to look beyond your current situation to project your costs over the coming months or years (depending on whether you plan to hire or buy). 

You can reduce the financial impact on your business by:

• Using financing to buy the equipment – you may even get lower rates than hiring the asset, and after you complete your payments, you’ll own it.
• Purchasing quality used equipment could be more cost-effective than renting over the long term.
• Examine your business as a whole

Short-term purchases without long-term plans can be costly

Consider these questions when drawing up plans to invest in more equipment:

• What effect will the new equipment have on your human resources?
• Will you need additional staff or relocate staff elsewhere throughout your business?
• Can the equipment you’re replacing be used elsewhere in your business?

The length of the job or project

A crucial deciding factor as to whether the right time to purchase more equipment is now is the length of an upcoming project (or the frequency of extra jobs coming up).

Additional short-term work suggests hiring would be a better option. Likewise, if you need a highly specialized (and expensive) piece of equipment, it might be preferable to hire it.

It makes more sense to buy for longer-term projects. Hire costs can add up quickly as a job gets delayed and pushes past its expected finish date.

Usage and availability

Knowing that the right equipment is available to your business whenever needed is a significant advantage. If anything unexpected happens with a job, you’ll have the necessary equipment to react and reschedule.

Potential clients will also notice that you own the equipment necessary to complete their requests, helping develop trust with your business.

When you decide whether to hire or buy, consider the risk of your preferred hire company not having the equipment you want when you need it.

Deciding to hire or buy

You can get the new equipment you need by renting (hiring) or buying. Each has advantages and disadvantages, so it’s worthwhile assessing your business’s current financial situation, its current capabilities, and its plans (for growth).

Weigh up the pros

If you choose to purchase new equipment, the advantages over hiring will include the following:

Availability – you can be sure the equipment will be available when needed.

Ownership – you own the equipment and can potentially get a return on it when you sell it.

Additional financing – if using a loan to pay for your equipment, you might be able to get extra funding to cover transport, training, or installation.

If you decide to rent the equipment, the pros include the following:

Cost – smaller initial investment

Maintenance – the lender, should handle insurance and maintenance.

Technology – you can usually hire the latest equipment available and should be able to upgrade as your project progresses.

Will renting make your life easier in the short run while you consider buying at a later date? Will buying now be more beneficial to your business over the longer term?

On the accounting side:

If you buy before - the end of the year – the Internal Revenue Code – Section 179 allows for accelerated depreciation. If your purchase is less than $500.00, it is always a qualified expense.

The bigger stuff is Vehicles / Tools Mounted On A Trailer / Generator / Specialty Equipment.

Depending on type - Life span and cost basis can trigger other tax reporting rules. Section 179 accelerated depreciation has been in place for many years.

Three reasons the 179 accelerated depreciation went into effect:

1. Stimulate the local economy – some purchases, such as QuickBooks, are purchased at local stores.
2. Give the business a reason to grow and expand by adding new equipment and additional employees.
3. Useful life ended long before the depreciation schedule ended years later.

Everything comes back to two issues - Taxes and Cash Flow

• If you have the cash or can finance, do you need to buy a piece of equipment for the field?
• If you have the cash or can finance, do you need to buy a piece of equipment or software for the office?
• From an operations viewpoint - If you purchase either now, can you use it to make or save money?

It’s easy to assume that the deduction will always be available. Congress decides what changes year over year in the details of the deductions. At one point (several years ago), vehicles over a certain weight (SUVs) had a cap on the depreciation deduction. They were considered luxury vehicles, and the extra features were unnecessary over the basic pickup truck.

Summary

A wheelbarrow and a shovel are cheaper but would a small Hitachi be more productive and cost less in the long run, which could give you more money to operate and grow your construction business? 

Taking into account the points above, you’ll get a clearer idea about whether now is the right time for you to purchase more equipment, either with your capital or through financing, or whether it’s a better option to hire for the time being.

Next steps

Talk to your accountant to discuss the pros and cons of hiring and buying new equipment.

Have a word with your bank manager about whether you can get funding to purchase the equipment your business needs.

Reach out to me; I'm ready when you are.

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

This Podcast Is Episode Number 497, And It's About A Guide To Construction Client Retention

Long-standing customers form the backbone of a robust and well-established business. Make it your mission to ensure that most of your current customers stay with your company for many years.

Understanding the High-Profit Client

Most of them have personality traits commonly known as drivers. Folks accustomed to getting things done quickly and efficiently do not mind paying professionals for servicing, repairing, remodeling, or building new construction projects related to their houses and commercial buildings.

Why it's vital to keep existing customers

Your current customers already have personal experiences dealing with your business and using its services. You won't need to spend much time, money, and energy convincing them to continue hiring you.

You and your staff know your current clients well. They're likely to increase the amount (or the frequency) of their purchases and recommend your business to others if you:

• Solve their problems.
• Meet their needs.
• Exceed their expectations.

According to the US Chartered Institute of Marketing, it costs between four and ten times more to win a new customer than to keep a current customer. Therefore, it's vital to implement outstanding client service to convert occasional customers into loyal, long-standing regulars.

1. Communicate consistently and manage expectations

• Let your clients know what they can expect from your business, including timescales.
• Ensure emails are clear
• Your loyal clients deserve communications that are more personal and less formal. Using impersonal emails for your more extensive email list is fine, but use more personal touches with your best customers.

2. Show your customers you appreciate them

You can show your customers you appreciate them in many different ways, including:

• Thank them personally for hiring you. The more special your clients feel, the more likely they will hire you again. They'll appreciate your thoughtfulness and value your service.
• Offer your long-term customers bonuses for their loyalty. Giving them a voucher, so they save money the next time. Or a voucher for someone they know who needs your service. It's great to offer new customers rewards and incentives, but that leaves existing customers feeling ignored.

3. Develop customer service standards

Develop customer service standards for your business. You could use some of the following guidelines for your business's customer service standards. Try to:

• Be polite, helpful, and friendly to your clients at all times.
• Respond to emails as quickly as possible, preferably within three hours but within a maximum of 24 hours.
• Listen carefully to questions and requests so that you can offer the most appropriate help or advice.
• Inform customers immediately if there's an unexpected delay in processing their requests or implementing change orders.
• Train your crew in customer service - everyone in your business who will contact customers should be trained in customer service.
• Use your business's customer service standards as a basis for your training. Ensure staff knows precisely what's expected of them when interacting with clients.

4. Deal with customer complaints effectively

Regard each customer complaint as an opportunity rather than an annoyance. This allows you to handle the complaint satisfactorily. If a customer complains, it shows they still care.

Steps to take when a customer complains

• Train your staff members to take several steps whenever a customer complains. They should:

Listen carefully to what the customer is saying. Understand exactly what they're complaining about and why.

Admit any mistakes that your business has made and apologize to the customer.

Make amends quickly. If necessary, ask the customer what they would like you to do to remedy the situation.

Promise to do better next time.

• Test and improve your business's customer service

There are several ways to find out how well your staff is handling their customer service duties, including:

Asking customers for feedback on how your business could improve its customer services.

Inviting your staff to suggest how your business could treat its customers better.

Use all these ideas to develop and extend your customer service skills. Ensure each employee has ongoing training.

5. Exceed customer expectations

Ways you can exceed your customers' expectations include:

• Delivering an excellent product or service. You'll keep customers for life if you exceed their expectations.
• Responding quickly to all customer questions, requests, complaints, and other communications.
• Training all your staff in excellent customer service skills.
• Managing all aspects of a transaction efficiently, from the sale to the delivery to invoicing.
• Dealing with complaints quickly and effectively.
• Delivering on your promises. Never promise anything that your business can't provide.

Final thoughts

Build relationships with clients and take time to learn more about them. Recommend solutions that address their specific problems. Go the extra mile to show your customers they're important to you. Ask for their input, as well. They'll get to know your products and services and offer insights into what's working and what could be improved. If you engage them--and make changes based on their feedback--you'll develop a loyal customer base.

Encouraging repeat customers makes solid business sense. It's far less expensive to keep an existing customer than to win a new customer. Recognize the value of your customer base and invest in building an exceptional customer experience that will ensure your customers return for many years to come.

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 managing 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

This Podcast Is Episode Number 496, And It's About Managing Payment Terms For Your Construction Business Clients

Getting paid correctly and on time by customers can be a constant frustration for business owners. Communicating your terms is the best way to ensure you aren't out of pocket – or are left chasing debtors.

Investors, developers, and shrewd business people designed the most popular method - those who understand the concept of divide and conquer - it is when contractors get little or no down payment for a construction project, do all the work, including change orders, and then try to collect their money.

What often happens is that contractors hate paperwork preferring to keep everything in their heads. Then when it comes time to collect their money, they have to re-sell the job and talk their customer into parting with their money.

Contractors who finance working capital with their own money and whatever they can borrow will earn less profit and put themselves at a higher risk of failure than contractors who use Other People's Money (O.P.M.).

The importance of setting your terms of payment

Your payment terms let clients know when and how you expect to be paid. Setting your terms and letting your customers know your expectations gives you better control over your business and a valuable platform for resolving potential payment issues.

Remove barriers to sale

Setting payment terms shouldn't discourage regular or new customers from doing business with you – there are advantages to giving clients several options.

Encourage clients to hire your services and remove barriers to the sale by making the purchase as easy as possible through a variety of ways to pay, including:

• Mobile payment options.
• Cash or check.
• Bank deposit.
• Online money transfers to your bank account
• Debit or credit card payment.

Take the time to become familiar with all these options and their relative pros and cons.

You might, for example, decide to accept only major credit cards, offer a discount for cash, or give your staff leeway to negotiate cash discounts if customers request this.

Know your industry's norms

It's worth researching your industry's generally accepted payment terms and terms competitors use. This doesn't mean you have to follow suit. You may be able to spot a gap or opportunity to be more flexible. The following examples could build a competitive edge:

• Feature more payment options than most competitors.
• Provide quicker and easier ways to pay.
• Offer a discount for cash deals that give you immediate cash flow and protect you from credit payment defaults.
• Offer longer payment terms in return for a slightly higher price.
• Investigate faster and more convenient ways to pay using the latest smartphone technology.
• Offer variations for payment

There are numerous terms you can set out for your customers to pay. Sometimes it's best to use a method that works for you both.

Payment in advance

Some businesses, such as those operating over eBay or other auction sites, require payment in advance to protect against possible online fraud.

Customers first pay the purchase price (including shipping costs). You then wait for the payment to clear before supplying your services.

Although this might not work for your type of business, still be wary of relying on a bank deposit or email confirmation not sent directly from the depositing bank as proof of payment.

Progress payments

These can be useful when working on a lengthy project, such as building a house or a massive remodeling project.

Progress payments serve two critical purposes:

1. They provide a regular cash flow to pay running costs.

2. They protect you against total loss if your client goes bust.

Standard practice is to build progress payments into contracts based on measurable milestones.

Early payment discounts

Early payment discounts can encourage people to pay on time. They're more useful on higher-margin services as the deal will have less impact on your profits than thin-margin products.

For example, if you offer clients 60 days of credit, consider a 5% discount for payment within 30 days.

Some clients will try to claim discounts after the due date. If you don't stick to them, your customers won't either. It's in your interests to politely but firmly point out your terms of trade.

Contracts and debit orders

Businesses that offer regular services, such as plumbing maintenance, can benefit from offering customers a set annual (or longer) contract. The attraction for the customer is a price that's typically lower than paying for each visit or service.

Requiring the client to set up a debit order eliminates time chasing payments. Spreading the cost over 12 monthly payments can also make it easier for them to manage their budgets. Meanwhile, your business benefits from a regular cash flow.

Selling on credit

Selling on credit terms can expose your business to delayed payments or outright loss, affecting your cash flow. Some rules to help you include:

• Developing or adapting a credit application form – your bank manager can help.
• Asking customers for business references and permission to do a credit check.
• Setting agreed on credit limits.
• Clarifying your payment terms – 30 days or 60 days are the most common.
• Explain any interest charges you'll impose on late payments.
• Getting your customer to sign acceptance of these conditions to prevent future arguments.
• Monitoring any overdue payments or orders that will breach agreed credit limits.

Choosing your payment terms

By now, you'll have a sure idea of payment terms that could suit your business. Run your choices past your accountant, bank manager, and lawyer for their input.

Remember that your terms should attract clients, not turn them away. You might lose sales if you don't accept credit cards or add a surcharge for credit card payments. In this case, weigh the extra costs of accepting credit card payments against the business you might otherwise lose. It's your decision.

Communicate your terms to customers

Whatever your payment terms are, clearly communicate these in your terms of trade, website, and business materials.

Final thoughts

There are many accounting and invoicing software platforms and invoice templates out there that you can use. As a reminder, billing your clients depends on your signed contract, and sending invoices is based on this agreement's details. Again we recommend you hire a reasonable construction attorney and have that person write your contracts. Depending on your business needs, we can always help a little or a lot.

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

This Podcast Is Episode 603, And It's About The Real Cost Of Bad Construction Client Service Have you ever paused to consider the real impact of your business's customer experience? Is it lifting your brand or dragging it down, along with your team's morale? Today's consumers expect nothing short of excellence, so understanding the consequences of poor customer service is vital.   So, what does poor customer service cost you? Let's delve into the details—they might change your perspective.   The ripple effect of dissatisfied customers   Every business faces it sooner or later—a client who leaves less than satisfied. But don't be fooled into thinking that the story ends there. Unhappy customers, in your case, homeowners, rarely stay silent. They're more likely to share their experiences with friends, family, and the vast world of social media. What's worse, a scathing online review can echo for years, impacting your brand's reputation far beyond the initial complaint.   

The National Customer Rage Survey highlights a worrying trend: many consumers are airing their grievances publicly, and the numbers are rising. This digital age makes it far too easy for a bad experience to snowball into a PR nightmare, causing potential sales to slip through your fingers.

Damaged Reputation: More than just a bad review

When your reputation takes a hit, it's more than losing one customer. It's about a domino effect that can push potential clients away before they even give you a chance. With social proof playing a crucial role in purchase decisions, even a handful of negative reviews can deter future business. In a competitive market, a damaged reputation can be a slow poison, eroding consumer trust and loyalty over time.

Decreased customer lifetime value

Businesses often strive to augment a customer's lifetime value. However, poor customer service can drastically reduce this value. When customers feel undervalued or mistreated, they are less likely to return, cutting short the potential revenue they could have generated. This not only impacts immediate sales but also affects the long-term relationship that could have been nurtured through consistent, positive interactions.

The cost of increased churn

High customer churn is a silent killer for any business. When customers don't feel heard or appreciated, they're more likely to jump ship to a competitor who promises better service. This constant turnover is not just costly in terms of lost revenue but also in the effort and expense required to attract new customers to replace those who have left. A revolving door of clientele can undermine your service business and drain resources that could be better spent on growth and improvement.

Employee morale and productivity

Believe it or not, poor customer service affects your customers and employees. Handling disgruntled customers is draining, and over time, it can significantly impact employee morale and productivity. When your team constantly deals with unhappy clients, it can lead to burnout and decreased performance, affecting your business's overall efficiency. Investing in proper training and support for your team not only helps improve customer interactions but also boosts worker satisfaction and output.

Missed opportunities for growth

Every negative customer interaction is a missed opportunity for improvement and growth. Poor service can blind you to valuable feedback that could lead you toward better practices and innovation. By focusing on delivering exceptional service, you open the door to learning from each customer interaction, paving the way for a more robust and dynamic business model.

Three steps to mitigate the costs of poor customer service:

Understanding the costs of poor customer service is the first step, but addressing them requires actionable strategies. Here are three practical steps you can take right now to turn things around:

1. Enhance employee training and support

Equip your team with the skills and resources they need to deliver exceptional service. Regular training sessions and workshops can help employees stay sharp and motivated. Consider role-playing customer scenarios to prepare them for real-life interactions. By fostering a supportive environment where employees feel valued and empowered, you not only improve service quality but also boost morale and productivity.

2. Leverage Customer Feedback

Don't shy away from feedback—it's a goldmine for improvement. Implement systems to gather customer opinions through surveys, reviews, and direct communications. Use this feedback to identify pain points and areas for enhancement. Actively listening to customers and responding to their needs can transform negative experiences into opportunities for growth, demonstrating your commitment to their satisfaction.

3. Improve Communication Channels

Make it easy for customers to reach you. Efficient communication platforms like live chat, social media, and customer portals can enhance the customer experience by providing quick and practical support. Ensure your team is responsive and transparent in their communications, keeping customers informed and engaged. A streamlined communication process resolves issues faster and builds trust and loyalty.

So, how do you rebuild trust after a client vents frustrations online? Breathe. Don't think the damage has been done - at least not yet.

1. Leave the negative review up.

A negative review doesn't have to be the end of the world. Although customers like to see five-star reviews, they understand that perfection is almost impossible—and probably a sign that something is "too good to be true." In that sense, having a client or two provide negative feedback gives more credibility to the positive reviews. Customers expect to see a couple of negative reviews. If they're among the positive feedback, the negatives won't hurt you much and may even increase your legitimacy if handled well.

2. Respond to the review honestly.

Customer complaints are a way to build trust with your potential clients by allowing you to respond honestly and professionally. Did something go wrong that was out of your hands? Offer an apology and explain what happened. Was there a misunderstanding? Look for the best opportunity to clear it up. Has the reviewer requested additional information or a solution? Respond online to show what you've done to address the situation. Did the reviewer misunderstand a policy? Explain your policy and invite them to contact you with further questions.

Doing so shows readers that you take their concerns seriously and are willing to take responsibility when things go wrong.

3. Learn from negative reviews.

If you see the same concerns repeatedly in the online feedback, it may be time to review your services. Negative reviews give you insight into areas where your customers feel your business could make changes, so take the time to consider what you're being told. You can improve your offerings or communicate better with clients to manage their expectations.

Thank them for their feedback, let them know you're taking their concerns seriously, and explain your next steps.

Final thoughts

Implementing these steps can significantly reduce the negative impacts of poor customer service, leading to happier customers, more engaged employees, and a more substantial brand reputation. 

Don't panic. A bad review or two isn't likely to ruin your reputation. A few negative reviews can help you build trust with potential clients. You can use the situation to build confidence in your construction business by being responsive, transparent, and honest.

Finally, remember that a proactive approach to customer service can be the key to unlocking long-term success. You take good care of your clients, so let us take good care of your construction bookkeeping and accounting. Reach out anytime.

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 managing 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

 

This Podcast Is Episode Number 495, And It's About The Common Construction Payroll Implementation Errors You Can Easily Avoid

 

Small business owners spend an average of eight hours monthly performing payroll functions. That's 12 business days a year that could be spent generating sales, prospecting new business opportunities, improving products or services, or servicing customers.

Upgrading or changing your payroll system comes with a ton of attractive benefits. Saving time and money, making everyone's account more manageable, and better integration are all excellent reasons to consider a change.

But if the switch is mishandled, the results can be catastrophic and lead to long-lasting problems. Read on for tips on avoiding a disastrous payroll system migration.

1. Give the project the time it needs

People may indeed enjoy coming to work. But for most people, earning money is the main reason they seek employment. Our jobs make the world go round and support our families and us so that we can afford everything else.

Not getting paid, or getting paid incorrectly, is a massive problem for your employees. As a business owner, you want to ensure your employees are paid right and on time. This protects your business, but it also protects their happiness.

Changing payroll systems is a huge undertaking. There are many moving parts and people who will be affected. Make sure to give this project the time and attention it deserves.

Determine what will be necessary to make the transition, understand whom it affects, and communicate with everyone involved. The planning process is critical. Treat it as the foundation for making the switch, and the rest will fall into place.

2. Map out integrations

All payroll software will do the basics, but that's just the beginning of your new system. Learn about what other software will integrate with your new platform. Do your research for what add-ons you will need, and build accordingly.

Your new system will be able to connect with HR software, advanced accounting functions, time-tracking tools, and so much more. Envision what your complete system looks like and understand how to get it to all work together.

When you have the complete picture from the planning stage, it will make the transition a lot smoother.

3. Adjust the platform to your needs

The primary motivation for implementing a new payroll system is to make things easier. Yet, many businesses overlook the ways that their new technology can help. It's easy to lean on old methods for getting things done because they're familiar, but that would be a mistake when switching to a new payroll system.

Make sure you know about and understand the features of your new platform. This is where the real-time, money, and energy savings will come in. Automate anything you can. When these tools prove their worth, your team will understand the reason for switching.

4. Don't bring over insufficient data

When implementing or switching to a new system, take the opportunity to go over your incoming data. Yes, all of it. Get rid of what you don't need while keeping in mind what you have to keep on hand according to any relevant tax agencies.

While payroll software is beneficial, it can only do so much. If you put insufficient data in, it will spit bad data out. Go over the information you're inputting with a fine-toothed comb to get the best result.

5. Test, test, test

Before you officially implement anything, make sure to test it out. This phase is critical and is often overlooked. There's no quicker way to turn your staff off of something new than for it to work poorly or not right out of the gate. Take the time to test now and reap the benefits when you go live.

A Better Approach

If you think hiring a full-time in-house payroll staff is not practical, you can always come to us and let us take care of your payroll. Whether you need weekly, fortnightly, or monthly processing, our team is flexible enough to do it for you. 

When contractors ask which payroll option we recommend, we often say Direct Deposit. As usual, the reasons are simple and related to our primary role as "Profit And Growth Specialists For Contractors" and our mission, which helps you - the people of the most significant industry on earth - the construction industry, to achieve your definition of success. 

Option 1 - Paper check looks like the least expensive. Calculate payroll, handwrite or print a paycheck, and hand it to your employee.

What is the first thing an employee does after getting a paper paycheck? They go to the bank, or the check cashing store and get cash!

If they are paid for travel time to and from the job site, they will typically cash their paycheck to the job site or take a break as soon as the bank opens. Considering this scenario, there are three costs to consider: 

#1 Travel Time - It will take ten minutes to detour to and from the bank or payday advance company, plus ten minutes inside the building.

For example, you pay your employee $25.00 per hour, which means every ten minutes of doing personal business on company time costs you $5.94, multiplied by three equals $17.82. If your company earns 10% Net Profit, you need to sell another $178.20 worth of work to compensate for your loss.

If there is more than one worker in the company vehicle, multiply everything by that number.

#2 Cost Per Mile - To operate the company vehicle, which varies depending on the type of vehicles your company uses. Generally, the numbers range from $1.25 to $1.75 per mile. This considers Fuel + Insurance + Repairs + Maintenance + Registration + License divided by the number of miles driven. In this example, we estimate a three-mile detour at the middle range of $1.50 per mile = $4.50

#3 Delays On The Job - In construction, you deal with project-based systems, not operations or manufacturing-based operations. Every additional day you have to mobilize and de-mobilize costs you money. For example, if it takes (15) minutes for (4) workers to get set up in the morning and the same amount of time at night, your total costs could be $121.92.

Total cost for paper checks - between $15.00 and $50.00 per employee. To get the actual results for your company, some analysis would need to be run, or you would look in your Business Process Management System (BPM) for the answers.

Option 2 - Direct deposit could cost an additional $5.00 per payroll and $0.99 per deposit. Direct deposit drops into your employee's bank account one minute after midnight on the day payroll is due. Having a Professional Bookkeeper prepare the payroll is less with direct deposit because of the time saved in making and printing the paper checks, setting them aside for you to sign them, stuffing them in the envelopes, and taking time to pass them out.

Option 3 - Debit Card is similar to a direct deposit. The difference is that the employee does not need a checking account.

Final thoughts

Deciding to change your payroll system is a big undertaking. But some planning and preparation can be a smooth and rewarding transition. 

As payroll experts in the construction industry, we can keep your employees happy with timely and accurate wages, maintain tax compliance, and significantly ease your back office burden. 

So get in touch with me today if you'd like to learn more about how we can help make payroll easier for you. Give yourself the peace of mind you deserve!

 

We help a little or a lot, depending on your needs. I look forward to being able to assist you with any option that best fits your company. 

Please feel free to download all the Free Forms and Resources that you find useful for your business.  

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 206-361-3950 or sharie@fasteasyaccounting.com

This Podcast Is Episode Number 494, And It's About The Five Signs You Need To Start Outsourcing Your Administrative Tasks

When you start a small business, it's usually only you behind the whole operation. You wear many hats, from CEO to clean-up crew. As you pour your heart and soul into your business and it begins to grow, the amount of work involved grows.

Because a small business focuses on survival, you pay much attention to the bottom line. This makes much sense, but it also leads to being seriously overworked.

These days, contractors are under increased pressure to cut their prices to get enough work. And that means they need to reduce costs. New technologies and approaches in cloud computing for construction accounting give forward-thinking contractors a fantastic ability to get more for less -but in most cases, contractors' heads are still stuck in 1990, thinking they have to do everything themselves.

There will inevitably come a time when you must consider letting go of some control and paying others to take some things off your plate. Here are five signs that it's time for you to start outsourcing tasks:

1. You're overwhelmed and stressed

This one's a dead giveaway. If you find that there isn't enough time in the day, you're losing sleep, free time is a thing of the past, and you're not your usual self — you've reached burnout. This is not a sustainable place, and it would be wise to start offloading some activities ASAP.

2. You're spending time doing things you hate

Nobody goes into business hoping to spend their days completing tasks they despise. It starts with a dream or an idea for how to make things better. Or even an idea for how to make more money. Whatever the reasons you had for starting your construction business, they likely did not include doing tedious chores that you don't enjoy.

When you decide to outsource, start with functions that are eating up your time in an unenjoyable way. Once you let these go, you'll find your purpose renewed because you can focus on what you love about your business to begin with.

3. Quality of work has gone down

When you're working hard and trying to manage all aspects of your business, it can be easy to miss this sign that you're not juggling it as well as you thought. The first signs often come from a client complaint, like delivering a lower-quality product or missing something in your services. 

When the quality of your work declines, it's time to hire some help. If you do not satisfy your customers, your business will begin to suffer – and then you won't need the extra support because there won't be a business to run.

4. No time to grow

If you want your construction company to grow, you need time to plan for it. If you're getting by and unable to plan your next steps, you need to outsource some tasks. When you find that you're barely holding it together to get everything done and there's no time for anything else, get help. No business gets to the next level by completing the bare minimum.

5. No personal time

When your work life is taking over your personal life, it's time to enlist some help. It isn't sustainable to work so hard that you have no time for family, friends, or enjoyable pursuits.

Did you get into business so you could work 16 hours a day, seven days a week? Probably not, but you may find yourself doing that for weeks and even months at a time. You might save a bit of money, but you will also exacerbate your stress and miss out on the enjoyable parts of life. 

If that's the case, you're going to burn out. It's time to get some help. 

Outsource Your Construction Bookkeeping

Anything not related to your core construction business is an outsourcing candidate.

When I say, "outsource your contractor's bookkeeping," I do not mean turn it all over to us or any other contractor's bookkeeping service because this never seems to work out well. No, I'm talking about outsourcing specific bookkeeping services related to data entry, bills, payroll processing, and preparing Quarterly Tax Returns.

It is crucial that you keep control of your money. Outsourcing a contractor's bookkeeping is one of the ways to avoid bookkeeper embezzlement. Never, ever let an outsider pay the bills, print checks, and authorize payment for payroll or any tax payments.

I suggest looking at every part of your internal contractor bookkeeping service and asking yourself a simple question: is this a unique and critical part of our construction company, and is it something that only we do? If so, it stays in-house and needs the brightest minds you have working on it. If not, it is a candidate for outsourcing, and you need to look at it more closely.

Outsourcing a competent construction bookkeeper is a sound business decision as it gives you access to expertise and guidance you might not otherwise have, and it frees up your time and money to take advantage of other business opportunities. 

Final thoughts

As non-employee, we can give helpful, honest advice on improving your procedures and overall efficiency. Most employees want to fill their time and are resistant to change. Outsourcing your construction bookkeeping to us means you can pick and choose what services you want. We will work within your budget, so there are no surprises. 

It's a problematic mindset shift for an entrepreneur who has spent all their time trying to save and earn as much as possible. But needing to outsource your tasks is a sign of success. When you take the leap and hire someone to share the burden, you will be pleasantly surprised by the many ways that it pays off.

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

This Podcast Is Episode Number 493, And It's About Management Priorities For New And Experienced Construction Company

In the past, Construction Project Managers were laborers or served an apprenticeship in one of the skilled construction trades and were promoted to foreman. This meant many people were more comfortable in manual labor without management skills. And when "things" were put in charge of "people," the results were not usually favorable.

Because of this, many construction companies failed and went out of business due to the Cost of Chaos in their businesses. And it is still happening today.

In the late 20th century, construction and construction management were separated into individual disciplines, each with its methodologies, terms, and definitions.

Project Management Institute developed a set of standards and guidelines, including a glossary of terms to make it possible for construction project managers worldwide to have a common language to communicate.

In today's construction business world, there is a need for excellent project management. Highly skilled and qualified Construction Project Managers on your payroll can provide your company with another competitive advantage over your competition which could be like having a money tree in your backyard. As a result, you can put more money in the bank to operate and grow your construction business.

Whether you just started your construction business and are a one-person company (just looking to hire a subcontractor for other parts of your project) or a weathered construction company owner looking to regain skills to operate your business confidently, it is essential to prioritize these management guidelines:

1. Put together a solid advisory team

Starting a business and owning a construction business can be a lonely process, and thinking you can do it all yourself is the road to extra stress and pressure. Study successful business owners, and you'll find they have surrounded themselves with a strong group of advisers.

A typical core team would include an accountant, a lawyer, a banker, and a mentor, such as an experienced business person you admire. You can then add experts who can give you quality advice on specialist areas where you may lack skills, such as finance, production, marketing, or technology.

2. Choose the proper business structure – with advice

Should you start as a sole proprietor, a limited liability company, a partnership, or something else? Get advice, as each structure involves legal, regulatory, and tax issues.

Think beyond this year. Which structure will carry the most credibility with customers? What's the best system for expanding the business or taking in partners? What form would best suit future investors? Think also of succession – one day, you will want to sell or pass on the business to family, staff, or an outside buyer.

3. Sort out all compliance requirements

You don't want to be distracted by compliance issues once you're in business.

List everything you need to sort out now, from health and safety issues to permits and consents required from Federal, State, or local authorities. If you're starting a business from home, do you need permission? Will your business involve hazardous activities, noise, or toxic chemicals? If so, what licenses do you need, and what health and safety measures do you need to take?

What taxes do you have to pay, and when? What is a sound system for getting this done, so you don't miss any payments or incur penalties?

Make a checklist and work systematically through it with help from your advisers.

4. Set up well-built systems

Good business is all about substantial systems. To run your business well, you need efficient processes.

Time spent setting up simple but effective systems will pay off handsomely. Think about everything from production and work processes to service and billing. With good strategies, you can:

• Run the business more efficiently and delegate more confidently.
• Deliver efficient and consistent quality in products, services, and customer delivery.
• Train new staff more quickly if they have clear operating manuals to follow.
• Delegate or take time off with more confidence that others can follow operating manuals.
• Add value to your business in the eyes of a future buyer.
• Build the foundation you will need to future-proof your business.

5. Develop good credit management

You need a fast, efficient, consistent credit management process if you sell on credit. As a new business, you need the money owed to you as soon as possible to pay bills and lower your interest costs. Never let things slide, or some customers will treat you as a source of cheap finance. Key points:

• Check the credit standing of all new customers, even though you may be eager for their business.
• Make sure customers understand your terms of trade and sign an agreement with them.
• Set credit limits and a system to flag orders exceeding the agreed credit limit.
• Bill promptly and send statements out on time.
• Follow up on late payers immediately. Late payers must know you're always on their case. In order of effectivity, visit them, call them, or email them.

6. Deploy an exceptional accounting system

You need timely information to make the right business decisions. Get help from your accountant to set up an easy-to-operate accounting system.

A correctly set up construction accounting system should allow you to:

• Automatically download and categorize bank statement details, saving time and eliminating manual data entry errors.
• Generate instant profit and loss, budget, and other financial reports.
• View a quick dashboard summary of business performance.
• Bill customers, track payments, and flag overdue payments for your attention.
• Keep your cash flow position updated so you can update your forecasts.
• If you choose a cloud solution, you and your accountant get the added benefit of being able to access the information from any internet connection.

7. Identify and monitor your key drivers (KPIs)

Some Key Performance Indicators (KPIs), such as gross profit and net profit margins, are common to all businesses. But each company also has KPIs specific to its types, such as production units for a manufacturer, conversion rate of visitors into sales for a retailer, or billable hours per week for a service business like yours.

Get help from your financial advisor or accountant to identify the core drivers for your type of business. Then monitor them closely and set improvement goals.

Monitoring your KPIs will help you grow your business and show other stakeholders, such as lenders and investors, that you have your finger on the living pulse of your business.

8. Build good relationships with stakeholders

In addition to customers, lenders, investors, and suppliers are also important stakeholders in your business. Make a point of developing good relationships with all of them. As well as enhancing your business experience, good relationships will pay off handsomely in tough times.

Paying suppliers on time will develop a relationship you can draw on later to negotiate more acceptable payment terms if times get tough. Showing you have good money skills and can forecast cash flow crunches well in advance will build the confidence of your lenders and investors.

If necessary, learn what you don't know, such as financial management basics or construction bookkeeping and accounting.

Final thoughts

Too many construction businesses fail because the owner has not established efficient management systems. This typically happens because the construction company owner is so caught up in the day-to-day operations that the fundamentals of proper business management get forgotten. Often too, it must be said that the owner doesn't like bookkeeping or other administrative tasks, so these get put on the back burner.

The whole point about putting in sound systems is that they free you to spend more time working ON your business, not in it. Having weak systems is the road to stress and burnout. On the other hand, solid business systems will enable you to work smarter, not harder.

 

We help a little or a lot, depending on your needs. I look forward to being able to assist you with any option that best fits your company. 

Please feel free to download all the Free Forms and Resources that you find useful for your business.  

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 206-361-3950 or sharie@fasteasyaccounting.com

 

This Podcast Is Episode Number 492, And It's About The Top Construction Company Marketing Blueprint

Construction contractors like you are primarily in the "Hurry Up" and "Wait" zone.

• • Hurry up and answer the call from the customer. 
  • Wait to make the appointment. 
  • Hurry up and get to the job. 
  • Wait for the customer to come home, to be available. 
  • Hurry up and create the proposal. 
  • Wait for a decision. 
  • When the client says "Yes," it is - wait for the Job Deposit.
  • Wait to Start The Job

This Hurry Up and Wait for activity makes it hard for the contractor to schedule other jobs. Many contractors only hold a place open for the client once a job deposit has been received. 

Unless your construction company has lots of work stacked up, there will be times when there is nothing to do, and that is the best time to think about Strategic Marketing and following the adage:

"Dig your well before you are thirsty"

You won't build a loyal client base if you can't earn your visitors' trust, which is why companies value social proof highly. Proving your construction business's value online takes a unique skill set, but boosting it during your downtime is a great practice. 

While waiting for something to happen, here are a few strategies that can help you generate leads:

1. Build credibility quickly

Just started? Why should people hire a new business? Your first challenge is quickly overcoming their doubts by building trust and credibility. Some tips:

• Promote your skills and experience, plus those of your staff and associates.
• Join your industry or professional organization and start building a profile.
• Commission a writer to produce articles using your ideas.
• Feature customer feedback and projects completed on your website.
• Gain a market foothold by offering a service or product at less than full price in return for an endorsement you can use. (Regard this as an advertising expense.)

 

2. Focus on solving pain points

Identify and then focus sharply on solving the customer's challenge, whether it is a problem, a desire, or a fear.

Be specific and monetize your solution if possible. Try building a story around your service that the customer can relate to. For example, how much does double glazing save an average house in heating costs? Wrap the story of the saving around other payoffs, like a more comfortable and healthy living experience – warmer in winter, cooler in summer.

Service businesses often have a reputation for being late. If you offer services, can you guarantee to arrive on time? Look for the 'hidden' pain points in your industry.

3. Promote your point of difference

Boil down your client solutions into a compelling point of difference that will overcome customer hesitation. Refine this competitive advantage into a memorable slogan or a few short sentences at most. Run the result past your advisers and some small business owners. Once they approve, vigorously promote your point of difference on your website and in all your marketing material. Make sure staff can also confidently communicate it to customers.

4. Develop a strong website

A website can be a powerful marketing tool. Some priorities:

• Make sure customers can find you. Get expert advice to improve your search engine ranking.
• Make the website fast and user-friendly. Get outsiders to test the site without prompting and fix what frustrates or baffles them.
• Include credibility-enhancing Frequently Asked Questions, Customer feedback, or Projects Completed sections. People often browse a website to build their confidence in your business before they buy.
• Include social media buttons to help readers spread the word.
• Encourage people to sign up for a newsletter in return for a discount or other incentives.
• Give people a reason to return by featuring hot deals and new information on the home page.

5. Use low-cost promotions first

Try the low-cost tactics first.

Direct mail and telemarketing can still be cost-effective for higher-priced services or products. Small-scale runs can give you an indication of demand and allow you to experiment with different options.

Blogs and profiles on social media such as business-focused LinkedIn or people-focused Facebook and Twitter are valuable ways to develop conversations with customers or potential customers.

If you are new to social media, research online etiquette first.

6. Start with a splash

If you just started, can you come up with some newsworthy event or gimmick to launch your business with a splash? Study how other companies launch. Can you do better? If you can't afford to hire a PR firm, ask a retired journalist with media contacts to help you put together some press releases.

The media are always hungry for good stories. Some innovative thinking can lead to free publicity in the local media.

7. Build a client database

A good client database is worth gold. It is easier and cheaper to sell more to existing customers than it is to find new customers. Start capturing customer information (with their permission) from day one and decide what details you need to include to help you build repeat business.

For example, you can record what customers hired you for, how much they spend, and when their purchases of services are likely to need renewal.

Your database will help you build a complete profile of your customer types, so you can focus on finding more people like your best clients.

8. Network vigorously

Business is all about people. The more people you know, the better, so try to get out there and meet others in the community. Join your industry or professional association and local organization such as small business networks, the chamber of commerce, and community groups. We are highly recommended by locals here.

9. Focus on referrals

Word-of-mouth referrals are the most cost-effective way of gaining new customers because you don't have to spend anything on advertising or marketing. Research has repeatedly shown that referrals have a higher conversion rate (inquiries to sales) and spend more than other customers. People have more confidence in a business recommended by friends or colleagues.

Referrals will happen naturally if you provide excellent service and good value, but you can improve your referral rate through an active program of incentives.

10. Measure to improve

Give preference to marketing you can measure to avoid the mistake of many businesses who don't measure marketing results. You may be talked into some radio or newspaper ads, but if you don't measure what happens, you'll never know if your investment was wise or a waste.

Measuring can be anything from adding a clip-out coupon or code to asking customers, 'By the way, how did you find out about us?'

The results may surprise you but will also empower you to focus your marketing budget on what works.

Final thoughts

Focus on building and nurturing your construction business and personal relationships online, especially when you're in the "Hurry up" and "Wait" period. There are many things beyond our control, but Marketing your construction business, is one of the things we can take advantage of right now.

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

 

This Podcast Is Episode Number 491, And It's About What Sets Your Construction Company Apart Let me start by saying it's good if you have competition. Indeed, competition pushes you to be innovative. It also means there's an established community for your services. If no one else is offering the service, there's a chance there's no market for it.   But, have you always wondered how a small construction company like yours could stand out from the crowd and its competitors? Awareness of what others in your industry have developed and provided leads to a newfound motivation and belief in making an impactful difference, whether within your company or your community.     The key to benefitting from the competition is knowing how to take on competitors. You measure your share in the particular segment you operate in and obsess about your immediate competition, just as contractors who did not market effectively did years ago.  

But first, you need to step back and ask yourself these three key questions and make sure you answer them in a way that will define and liberate your construction company at the same time.

Ask Yourself:

1. What am I offering? New construction, remodeling, or service and repair?
2. Who is my competition? DIY, other contractors, money homeowners for a construction project?
3. What is my fundamental competency - Residential, Commercial, or both?

Challenging yourself is the key to answering these questions. Write your answers on paper or computer, sleep on them and then revisit them again and again until you get to the truth.

Define The Type Of Contracting You Offer And Who Is Your Competition

Be that homeowner doing a weekend project, Handyman Contractors, Remodel Contractors, Trade Contractors, and other contractors and House Builders. It may not be the same form, structure, and category that you operate. For example, Home Depot does not see itself competing in the building supply business but for a share of the home and commercial remodel and repair market.

This approach and behavior across the organization, too, saw themselves as fighting for a share of the building supply market.

Getting The Leads And Doing The Work Is Only Part Of The Answer

Not answering them and acting on the knowledge is one reason many construction companies shrivel and die. They focus on the wrong areas to innovate or improve. They focus on the wrong enemy and threat. As a result, they miss what they could be doing to succeed and prosper over time.

Here are three ways your small construction company can establish itself from competitors and stand out from the crowd:

1. Concentrate, then generate.

What separates wealthy contractors from poor contractors? They concentrate then generate.

Returning to the critical questions at the start, successful contractors know what type of contracting they are good at. SWOT Analysis is one tool used in strategic planning for construction companies to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in determining the particular target market.

Concentrate

Strengths - are projects that your construction company does exceptionally well and earns a higher than average gross margin that gives you an advantage over other contractors. What are they, and how can your construction contracting company expand on them?

Weaknesses - are projects your construction company does poorly at and breaks even or loses money. What are they, and how can your construction contracting company turn them into strengths?

Opportunities - are projects and markets not currently being served where your construction company can enter and turn them into strengths. Have you considered tapping into the "work-from-home" market during this time? Or commercial establishments looking to remodel to implement a better floor plan?

Threats - are elements outside your construction company that could cause trouble for you or your construction projects. What are they, and how can your construction contracting company turn them into opportunities?

A SWOT analysis will help you identify each of these characteristics for your business to understand better what you're doing well, what you could improve, and which external factors could affect your business.

Generate

Marketing is a science, not an art. Now that you've analyzed your SWOT, you laid the foundation by having a vision for what your Construction Company will be when you finish building it, you know who you are, and you know who your prime client is. You can quickly generate more leads than you can handle.

2. Give the client what they want and deliver an excellent service.

There's room enough in most industries for competition. While it's a good idea to know who you're against, your clients are your priority. Focus your efforts on providing goods and services meaningful to them, addressing their pain points, and improving their lives. Market yourself to make those aspects clear. Show them why you're the ideal company to hire for their project.  

Large businesses have weaknesses. The bigger they are, the less personalized and responsive their service is. They market themselves to a broader audience and have to bring in more clients to cover their costs because their overhead is higher. 

In this respect, your size is an advantage. Fewer customers mean more personal service. That opportunity for relationship building will entice customers looking for extra attention.  

Examine what people love about your competitors but also what frustrates them. Build your construction business to address those gaps. If you find that something isn't working with your customers early on, don't be afraid to shift. Be innovative in responding to market changes and client demands. You'll have an easier time making that change early than once you're more fully established. 

3. Put together a stellar team.

It is one thing to be a carpenter, plumber, electrician, framer, drywaller, painter, or any other master crafts person and quite another thing to own a construction company that performs those things while managing a business.

Many small contractors have friends in the same trade and work well. Remember that being on your own is okay because employees are not required to succeed in this industry. You could also work well with a group of Trade Contractors and complete the work seamlessly as a team effort.

On the other hand, you could be a one-person remodeler who may have unknowingly built a team by working with highly-skilled professionals. For instance, the person who did your company logo or the banker who helped you set up a business bank account—outsourcing a specialist to help you with the things you are not an expert on - like a Website/Social Media Manager to take care of your online presence does wonder for your Marketing without needing to hire in-house staff and do their payroll.

Of course, a financial advisor or a construction accountant who has been where you want to go and can guide you will benefit your construction business. Optimize your time and skills by doing what you love and do best, and outsource the rest to operate better and grow your construction company.

Final thoughts

We are big fans of optimizing instead of maximizing. We've developed strategies that take the least amount of effort in the least amount of time possible. By taking advantage of existing knowledge from your competitors, you can improve and build upon these as they are relevant for you and your type of construction business.

Knowing that you're different from what's already out there and why you are different makes you attractive to your target market. Be the contractor who will do whatever it takes to rise above owning a job and develop a construction business that will provide for themselves and their families for a lifetime.

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

This Podcast Is Episode Number 490, And It's About How To Raise Your Prices: Value Over Price As prices continue to rise, you've likely noticed that your cost of doing business has increased as well. After all, the main point of any business is to make money, and you can't do that if you're no longer breaking even.    It's inevitable in every industry – you must raise your prices to continue making a profit. Many factors decide how much to charge, all of which are dynamic. The rising cost of goods, inflation, and a changing market are just a few reasons why any small business has to reevaluate its rates regularly to stay competitive (and to stay in business).   If you're overworked and overbooked, you're undercharging. People know your worth and are fighting for your time. It's time to increase your prices!   Although there's a lot to consider when raising your rates, make a point to reevaluate every six months. Here are some tips on how to increase your prices and how to tell your customers.  

• Accept that you have to do it

  It's a daunting task to consider raising your prices, as the danger of losing customers will be front of mind.   But the bottom line is this: you cannot deliver quality service if you're not charging enough. It's that simple.   If you're spinning your wheels trying to make up for the difference, you'll lose customers anyway. You won't be able to deliver the excellent service you're known for if you're constantly overworked trying to find profits elsewhere.    Raising your prices is part of doing business. It doesn't make good financial sense to swallow the cost to appease your customers. With that in mind, know that you're doing the right thing for yourself and your clients.  

• Understand what's costing you more

  At least once per year, consider what your business costs. Check which products or services are making money and which aren't. Then take it a step further and pinpoint the breakeven position for each area.   You will then be able to decide how much more you need to make to be profitable and comfortable. Evaluate all avenues – supplies, staff wages, bills, rent and utilities, training, etc. Doing this regularly lets you see which areas cost you more over time. Those that cost you more will likely benefit from a price increase.   

• Decide your approach

  A blanket increase would make sense if costs went up across the board. However, if you find that only some of your services now cost more to operate, it might be a good idea to increase only those prices. Your customers will appreciate only the necessary cost increases being passed on.  

• Gauge the satisfaction level of your current customers

  If you know that your clients are happy and believe they're getting excellent service, they will be happy to continue paying for that. They won't bat an eye when you inform them of your increase.   But, if they're not currently satisfied, a price increase will be an excellent excuse for them to leave. This isn't necessarily a bad thing–some of the lost profits from those customers leaving will be made up by the price increase to other customers. And clients that aren't happy could become long-term headaches for your company.  

• Give a lot of warning

  If you offer subscription programs (such as system inspections and routine maintenance for homeowners), email your client base three months before your planned increase to let them know your plans. State the reasons for you're raising your prices now.   Emphasize that this change is necessary to continue delivering the high-quality service they're used to. Giving enough notice to your clients, so they have time to react and prepare shows you respect them.   Send a personal message to long-time clients or ones that hold significant accounts. This shows them that you care about their reaction and gives you a chance to listen to their concerns.  

• Keep the communication lines clear

  Most clients will be OK with your price increase. Some will likely have questions, concerns, or even complaints. Focus on answering their questions.   This isn't a hard sell – it's a discussion. Because you've done your research, your increase is completely justified. As you take the time to chat with your clients, they will come to understand this. Remember, you aren't asking their permission to increase your prices. You're letting them know of the decision to do so.   

• Communicate your value

  Don't be shy about bringing up what you've delivered in the past. By reminding them of the great service you've provided already, they're likely to come around.   It's a great idea to provide options if they're still hesitant, but don't give away more than you can. For example, you could offer to keep their prices the same but trim the services included for that price. You can find a middle ground that works for both of you – alleviating their cost and your workload.   Final thoughts   Once you've researched and informed everyone, go ahead confidently with your price increase. You'll find that you can keep your customer base while keeping up with the increased cost of doing business. By doing so, you'll be able to continue providing your clients with excellent service.   If you're already in regular contact with your clients, the conversation around rising prices will be much less awkward. Remember, the price is how much your clients are paying for your service, but the value has no monetary measurement; it's what the consumer believes your services are worth, and you are worth it. Contractors like you deserve to be wealthy because you bring value to other people's lives.

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

This Podcast Is Episode Number 489, And It's About Construction Company Employee Compensation And A Note On Taxes There are a few different methods that employers use to pay their employees, and while they may have similarities, they each also have implications for your construction business and employees. On top of that, there may be a blended model at play, in which you offer two types of compensation at once, such as a wage and bonuses.    When paying employees, laws and the IRS have made the payroll function a time-consuming nightmare for the small business owner.   Small business owners spend an average of eight hours monthly performing payroll functions. That's 12 full business days a year that could be spent generating sales, prospecting for new business opportunities, improving products or services, or servicing customers.  

How you pay your construction employees will impact your finances and your reporting requirements. Read on to learn the differences between the main ways of earning money in the workplace.

Wages

Most entry-level positions offer an hourly wage in exchange for work. An hourly wage might be $20. So if the employee works 8 hours that day, they would be compensated $160 for that day.

The minimums set by law vary depending on where the business operates. Typically, the minimum wage is directly related to the cost of living in that area. 

Generally, a set number of hours can be worked in a week, and working beyond that maximum entitles the employee to a higher pay rate. There may be premiums associated with working undesirable shifts or an even higher pay rate that employees are entitled to for working on holidays.

Because of the number of hours worked, the specific days worked, and overtime, the amount an employee will potentially earn each year can vary widely when paid with hourly wages.

Salary

A salary is the standard compensation for management and upper-level positions. It is an agreed-upon annual total, where a certain number of hours worked per week is expected – typically 35 to 40. Other requirements will be outlined, such as how many days per week are expected.

Depending on the schedule, the total salary is divided into equal payments for each pay period. Often, compensation is agreed to as an annual figure, with each paycheck equally divided by the number of payments. If you pay an employee a salary of $60,000 yearly once a month over 12 months, you will pay $5,000 each, not accounting for any deductions.

How a company manages its payment schedule will vary from company to company.

Other pay, such as overtime, commissions, or bonuses, are separate from salary. Many companies don't offer overtime pay for extra hours worked, but they may offer commissions or bonuses for performance.

Commission

This is a form of compensation that is based on performance. The amount an employee receives can vary drastically, depending on how well they perform in a pay period.

The commission is typically a calculated percentage of goods or services sold. It is meant as an incentive to drive employees to make sales. For example, you may offer to pay $100 as a commission for each deal closed. An employee selling ten service subscriptions in the pay period would receive a $1,000 commission. 

All earnings made by commission are counted as taxable income.

Some salaried or hourly positions offer a commission on top of regular earnings. However, some positions, especially those in sales, can be based solely upon commission. This means that employees don't get paid if they don't sell anything.

Bonuses

A bonus is a compensation type that is not guaranteed. It is usually tied to some company goal, driven by sales or performance. A bonus might be awarded individually or to a team or other work group.

The idea behind a bonus is to create an incentive to meet a specific goal. It is rewarded when the goal has been reached or evaluated at particular times. Bonuses are offered on top of a wage, salary, or commission. 

Because of the unofficial structure, bonuses are loved by some and loathed by others. It can be motivating to receive a bonus, as it's completely separate from what an employee already earns. However, it can also leave employees feeling disgruntled if they feel they weren't supported well enough to reach the goal and missed out on the bonus. If the goals are unrealistic, employees may also struggle with motivation even if they are offered a bonus. 

Some construction company owners usually decide by the end of the year if their employees deserve a Holiday or Year-End Bonus. 

The key questions to ask yourself:

• Can I afford to give a bonus?
• Can I afford to provide a reward for my employees?
• Do I want to give a bonus to each of my employees?
• How do I decide how much Bonus I should give?
• Reality Check: Is bonus taxable?

Starting with the last question: In most cases, it may be taxable. All income is subject to State, Federal Payroll Taxes and is part of the employee's W-2. All forms of income, including bonuses, are income to your employee. 

The most common is to give your employee a set amount known as a 'Net Check". It would not seem the same to say, "here is your bonus for $200.00," but the actual check received is $169.04. Your employee will think you are tacky and cheap, and you can afford to give them a Big Bonus. 

Instead, you give the employee a check for $200.00, and the company pays all the payroll taxes. The bonus value is much higher when a check is grossed up (meaning you, the employer, pay all the taxes, company half, employee half of Social Security, Medicare, Federal Withholding, State, and Local Taxes).

Final Thoughts

We know that when it comes to compensation and payroll service, no one size fits all. Whatever payment structure your construction company follows, ensure you are consistent and fair as an employer and obey all applicable laws. We offer payroll solutions that meet your business's needs and enable you to spend time doing what you do best - running your company.

As we have been where you are now, we know that as construction business owners, you are selling your time first and your skill second. Your time as the contractor is the most valuable, so I hope you are doing tasks that only you can do. Contact us to learn more about different forms of compensation and what they mean for your bottom line.

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

 

This Podcast Is Episode Number 488, And It's About Ways To Get Rid Of Construction Accounting And Bookkeeping Confusions Doing something different is hard. Do you feel like everyone else is the most brilliant person in the room, and you just don't get it? Getting into a rut and repeatedly doing the same things is easy.   If those things work, then yes, continue to do them repeatedly. The problem is when something is not working, and you continue down the same path expecting a different result. The opposite of too much change can create another form of chaos. How do you know what is broken if you change a zillion things all at once?   Looking for ways to make your job easier is the goal of all construction contractors. The last thing you want to hear from your staff or a trade contractor is, "Do you want me to do that over?" Your answer is "No!" (thundered, with many extra words). What you expected was that your staff did it correctly the first time.  

In accounting, the first piece of the confusion comes from Construction Accounting Vs. Regular Accounting. Not everyone knows what construction accounting is, and easy to assume all accounting is the same.

Why is there confusion? From a tax standpoint, most construction projects are all lumped together, and after the Cost of Good Sold, Expenses, and Depreciation, you either made money or didn't. The Tax Accountant rolls up the numbers to compete for the annual tax return. Therefore, if the information is not needed to be broken down for taxes, then the Tax Accountant is not concerned.

As the Construction Contractor paying the bills, you are constantly concerned about which jobs are "Making Money or Losing Money." "Why does it seem like I am watching the money fly by and zooming out of my checking account? It never seems like there is any money left over!"

Second, confusion always comes about the material. A construction contractor may purchase material and resell it to their customer. Thereby thinking it is a reimbursable expense. (You lose money when doing this). 

Remember all invoices to the Customer (Retail, General Contractor, Spec Builder, Developer) are income. Every line item on a customer invoice is All INCOME. If the words are on the invoice, then the invoice is either taxable or non-taxable based on other factors. Washington State, for instance, has a clear explanation. 

Purchases for the material are Cost of Goods Sold or are expenses if you are short-cutting your accounting. I have seen financial statements that are backed out because they will reflect reimbursable income as a negative number and thereby show it as a deduction. (The net effect is double dipping on the expense side) The cause is the accounting software not correctly set up. 

New Construction Home Building is another area of confusion. In the mind of many construction contractors, a Spec home is any new house being built for resale. That is true; it is a New Construction House. It is a Spec Home for the Owner and Developer (who might be the General Contractor running the job). The question is on the construction accounting side. 

The question to be answered is "Who owns the house?" - It is a Spec House in the accounting system for the owner. For the General Contractor who is building a New Construction Home for a Developer, it is NOT a Spec Home. Why might it seem the same as both are New Construction Houses?   

If the General Contractor Does Not Own the house, then from an accounting side for that specific General Contractor, the house is a Custom Home with an owner who is not The General Contractor. 

Recognize expenses when the house sells. If the General Contractor, Developer Owns the new House being built, then it is a Spec House in the Accounting System. All costs roll up into WIP (Work-In-Process) and convert to COGS when the house is sold, not before. Otherwise, expenses one year; sales the next equals taxes.  

In Washington State: 

• All Construction Contractors working for a Spec Builder must collect sales tax on all services (labor and material) when billed from the General and Trade Construction Contractors.

• All Construction Contractors working on Custom homes, Residential or Commercial Projects, Large or Small Remodels, and Handyman Projects can accept reseller permits from the General Contractor. Sales Tax is billed and collected from the Owner by the General Contractor. 
• Contractors must collect sales tax on all retail projects, including Labor, Materials, Other. Sales tax must be collected on every line item. Customer Discounts can be given for any reason.

Fix the giant boulders one at a time. Get that one thing working, then move on to the next one. What is the most annoying thing you can quickly fix? We talk about accounting because that is our primary focus.

Start with the basics:

• Open a business checking account.
• Use a dedicated credit card for the business (if using a personal card).
• Create invoices, present them to your customer, collect the money and get it in the bank (Do you have an easy way for your clients to pay you?).
• Collect the money ASAP because, without cash flow, you are out of business.

No - the company with the most Accounts Receivable or Accounts Payable does not win a prize.

• Accounts Receivable means your customers owe you money.
• Accounts Payable means you owe money to your suppliers.
• Net Profit is the money left over. You want lots of Net Profit!
• You are not a banker! Stop borrowing money using your credit cards, Loans, and Lines of Credit, then finance customers' projects at 0% interest.

Final thoughts

Money makes the business world go round. Unless you provide a service that others are willing to pay for, you will not collect money to use for goods and services you want. It costs you money when you have uncollected Accounts Receivable. A grocery store will not let you run a tab or give them an IOU for milk.

Fast Easy Accounting does the bookkeeping, accounting, and payroll and offers business coaching for small, brand-new Construction Contractors, General Contractors, Trade Contractors, and Handymen across the USA, including Alaska and Hawaii. Do the parts only you can do; leave the rest to us. 

You are never too small for us to help, and we can help to begin with your first day in business. We are looking forward to being of assistance. Schedule your free consultation here.

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 managing 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

 

This Podcast Is Episode Number 487, And It's About Five Effective Ways To Retain Employees And Keep Your Company Healthy Traditionally, employers have relied on giving employees raises to retain their staff and reward them for being hard-working and loyal. Raises can get expensive, and there is often an upper limit for what you can offer regarding increasing salaries and wages.   Keeping your employees happy makes business sense. You want to keep your good employees, and it costs money to find, hire and train new staff. Beyond that, satisfied employees who feel valued are more motivated and productive.   Here are some ways to keep your employees happy that don't rely on higher salaries.  

1. Pay for professional development

Good employees want to improve their skills and grow professionally. Often, other priorities get in the way of upgrading skills. Paying for professional development, for example, by having a fund people can access or by bringing in experts to run workshops, shows your staff you care enough to invest in them. Meanwhile, your construction business benefits by having staff trained on the newest procedures and technologies.

An employee's development plan is an action plan that focuses on helping staff improve their knowledge, capabilities, and skills in areas related to your business.

Creating such plans shows your staff you're invested in their future, which increases employee satisfaction. It helps them understand their role and gives them a framework for expanding their talents. It enables you to develop your staff, promoting from within and encouraging your employees to grow with your construction company.

2. Encourage work-life balance

Employees want a fulfilling life, but finding a balance between work and home isn't easy. Having an employer that encourages a work-life balance makes it more accessible. Avoid messaging (texting, phoning, or emailing) employees after work hours and clarify that people should enjoy their personal time. Encourage employees to take their sick leave and use their vacation days. Be a role model by striving for work-life balance yourself.

3. Be transparent

Being open and honest with your workers fosters a sense of trust and belonging among your staff. Have regular meetings where you discuss your organization's goals, strengths, and challenges and receive input and feedback from your team. This encourages engagement and shows your workers that their perspective is valuable.

4. Having a set of values that applies to your staff

Sometimes organizations create noble values that they apply to their customers but don't apply to their workers. Employees see clients and customers being treated well but then wonder why those values don't apply to them. Create a set of values that applies to your staff. Set out how you want your team to feel. Do you want them to feel valued? Supported? What does that look like in your organization?

5. Ask your staff what they need

It's challenging to come up with solutions that everyone will find meaningful. Ask your staff what would be valuable to them–and what would make them happy enough to stay. For example, they may be pleased with additional vacation days or more banked sick time. Listen to their suggestions and consider whether any options they mention could work for your organization.

Final thoughts

Nobody likes to feel like a cog in the machine. Anything could be going on behind closed doors. There are, of course, expectations to meet in every job. However, employers would do well to remember that everyone working for them has an entire life outside the company. A construction company that supports and shows compassion to its contractors is likelier to keep the good ones from burning out.

While increasing salary is one thing you can do to keep your employees happy, there are other things they may value that you can offer. Employee development plans are a great way to invest in your employees, keep them motivated, and help them acquire new skills that will help them in their careers. It also enables you to promote from within your construction company, saving you time and money in the long run. 

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 managing the remaining cash flow to operate and grow their construction company sales and profits to put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

This Podcast Is Episode Number 486, And It's About Are You Charging Enough? Why You Should Raise Your Prices

There comes a time for every small business to raise its prices. While it may seem scary, remember that it's your job to keep costs fair for you and your customers. That means you have to charge prices that work for you and allow you to remain in business. 

Am I Not Charging Enough?

Knowledge leads to profits and cash flow. What makes knowledge powerful? Use of knowledge. In this cutthroat construction industry, you may not be able to outgrow your competition forever, but you can always outlearn them.

Knowing The 80/20 Rule For Construction Contractors will surely help:

• 20% of your customers typically generate 80% of your net profit 
• 20% of the goods or services you sell contribute 80% of your revenue
• 20% or 2 out of 10 of your staff create 80% of the value for your customers

The frightening consequence of the 80/20 rule is that 8 out of 10 hours we spend at work drive almost no value to the bottom line, and the most significant drain is trying to save money doing our contractor bookkeeping instead of reviewing the Key Performance Indicator (KPI) Reports. 

The essential value good bookkeeping brings to a business is an understanding of where your 20% is hidden. 

By generating daily reports that uncover the best clients, jobs, services, or products, you will soon see how you can refocus your internal efforts on doing more good work.

You could be asking the same question and still looking for reasons why you should raise your prices:

1. Your costs have grown

The thing about inflation is that everyone will feel the pinch – including you. If your construction business supplies are now more costly, you must pass those costs on. Otherwise, you're losing money, and your business will be on the hook. 

Nobody likes raising prices on their customers, but it's a necessity. You have to be able to cover your costs and continue supplying your customers with what they expect.

2. You're too busy

If you find that you're consistently booked 10-14 days out, it's a sign that you're delivering good value for money. People know your worth and are fighting for your time. That's great! But it also means that your service-based business has evolved.

This tells you that your customers are satisfied. And if they're happy, they'll likely spend more on your services. You may lose some clients in the process, and that's okay. You're now attracting higher-quality clients who know your value and are glad to pay more.

Beware of getting carried away, however. If you raise your prices by too much too fast, without adding any value, you'll find yourself in trouble. As your skills improve, you'll automatically provide more value for money. This is when raising your prices is justified and will be met with acceptance.

3. Enough time has passed

Even without adding more value or skills, raising your prices is okay. It's recommended. A good general rule of thumb is to increase your costs by 5-10% every year and a half or so.

This may sound like a lot, but consider that the average inflation rate falls within this bracket. If you don't raise your rates and the cost of your supplies hasn't gone down, you're losing money.

4. Your competitors are doing it

Yes, it feels great to offer your customers a fantastic deal. But don't be the one left with rock bottom prices when your peers have all raised theirs. This translates into you working harder to earn the same amount of money.

Be aware of what's going on in your industry and adjust. Customers judge a business based on perceived value. If you're at the bottom of the pack price-wise, they're likely to skip over you to get a good deal. Price yourself accordingly to attract quality clients.

5. You've become more valuable

You gain more skills, experience, and knowledge as you work in your field. This translates to more value. If your business is better than it was a year ago, it's time to charge accordingly.

Don't undervalue yourself. Customers often understand that you're more skillful and are glad to pay for your extra expertise.

6. You're trying to rebrand or reposition your service

There may come a time when you want to attract more high-quality, higher-paying clients.

This rebranding is meant to raise the perceived value and the prices along with it. One of the most prominent examples where you see this is in the restaurant industry. As a place becomes more sought after, you'll notice that they change the menu to make the descriptions more detailed. Maybe a popular item will change its name to make it sound fancier. But one thing's certain – the price tag will have gone up.

Final thoughts

There are many reasons why raising your prices is a good idea. It's just good business sense. Likely you're experiencing a combination of the reasons listed above. Whatever the case, ensure you do your research and review your prices often to make sure you position your business correctly.

As contractors like you move away from gut-level decisions and begin relying on their construction accounting systems to provide valuable financial and job costing reports, it's time you open a treasure chest busting at the seams with helpful information which can lead you to earn massive profits and by extension increase your wealth exponentially. Now, the power lies within you and what you can do with your knowledge. 

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

 

This Podcast Is Episode 602, And It's About The Financial Roadmap To Success: Goal-Setting For Contractors

Setting financial goals for your construction business may be one of your most important responsibilities as a leader and business owner. Your financial goals serve as far more than wishful projections; they form the backbone of your road map for success, both internal and external. Financial goals are something that every single business should possess regardless of its market, model, or size. Let's explore how to set and track financial goals that empower your business to thrive.

Why Financial Goals Matter for Your Construction Business

Financial goals are more than just numbers on a spreadsheet. They are the roadmap that helps you plan and make strategic decisions. Without clear goals, it's like driving without a destination in mind. Think about it—how do you know if you've arrived if you never set out where you wanted to go?

First, financial goals offer clarity. They transform your vision into actionable targets. When you know precisely what you want to achieve, laying out the necessary steps becomes more accessible. It's akin to plotting the course on a GPS; you need a specific endpoint to calculate the best route.

Second, financial goals motivate you and your team. A shared goal brings people together, fostering collaboration and boosting morale. Your business benefits from the focus and drive of working towards a common objective.

Lastly, financial goals prepare you for the unexpected. By regularly tracking your finances, you can identify trends and anticipate potential pitfalls before they become crises.

The Benefits of Financial Goal-Setting

Setting financial goals is a powerful tool for business owners, offering many benefits. Not only do they provide direction, but they also enable you to measure success and maintain focus.

• Clarity and focus

Financial goals bring clarity and focus to your business operations. With well-defined objectives, you can concentrate on activities aligning with your overarching strategy. This clarity makes decision-making more straightforward and more efficient, reducing the clutter of distractions.

• Motivation and accountability

Goals serve as a source of motivation and accountability. Having clear targets keeps you and your team motivated to achieve them. It also creates a sense of responsibility, as everyone understands their role in reaching the collective goals. 

• Risk Management

Financial goals help identify and manage risks. By setting tangible targets, you are better prepared to anticipate potential challenges. This foresight allows you to develop contingency plans and make informed decisions, reducing the impact of unforeseen events. It's the business equivalent of having a backup generator ready to kick in during a power outage.

Getting Started with Financial Goals

Setting financial goals may seem daunting, but it's easier than you think. Start by assessing your current financial situation. Understanding where your business stands financially is the first step to setting realistic and achievable goals.

• Assess your current financial situation.

Before setting goals, examine your financial records thoroughly. Look at your income, expenses, cash flow, and debts. This comprehensive overview will give you a clear picture of your financial health and highlight areas for improvement.

• Define clear and specific objectives.

Once you grasp your current situation, it's time to define your financial goals. Ensure they are specific, measurable, achievable, relevant, and time-bound (SMART). Instead of setting a vague goal like "increase profits," aim for something concrete, such as "grow net profit by 20% over the next 12 months."

• Align goals with your business strategy.

Your financial goals should align with your overall business strategy. Consider your construction company's mission, values, and long-term vision. Ensure that your financial objectives support and contribute to these larger goals. For instance, if expanding to another location is part of your strategy, set financial targets that reflect this growth ambition.

Breaking Down Goals Into Achievable Milestones

Significant financial goals can feel overwhelming, but breaking them into smaller, manageable milestones makes them more attainable.

• Create incremental milestones.

Divide your larger financial goals into incremental milestones. For example, if you aim to increase annual revenue by $100,000, set quarterly targets of $25,000. These milestones act as stepping stones, providing a clear path toward achieving your ultimate goal.

• Assign responsibilities and set deadlines.

Assign specific responsibilities to team members or departments and establish milestones' deadlines. This delegation ensures accountability and encourages collaboration. When everyone knows their role and timeline, the team can work cohesively toward the shared objective.

• Celebrate small wins.

Celebrate each milestone's achievement. Acknowledging small wins boosts morale and motivation, reinforcing the progress made. It's like celebrating each mile during a marathon—it keeps spirits high and momentum going strong.

Tracking and Measuring Progress

Setting financial goals is only half the equation; tracking and measuring progress is equally crucial.

• Implement a tracking system.

Establish a system to track and measure your progress regularly. This could be through financial software, spreadsheets, or other real-time data tools. Regular monitoring allows you to identify trends, adjust, and stay on track.

• Review and adjust goals periodically.

Financial goals are not static; they should be reviewed and adjusted periodically. Changes in the market, industry, or internal factors may necessitate modifications to your goals. Conduct regular reviews to ensure your goals remain relevant and aligned with your business strategy.

• Use Key Performance Indicators (KPIs).

Incorporate KPIs to measure your progress. KPIs are quantifiable metrics that reflect your success in achieving specific objectives. They provide valuable insights into the effectiveness of your strategies and guide decision-making.

Use Technology to Help You Reach Your Goals

Technology can play a pivotal role in managing financial goals effectively.

• Explore financial management software.

Consider using financial management software to streamline goal setting, tracking, and analysis. These tools offer budgeting, forecasting, and reporting features, enabling you to make data-driven decisions.

• Automate processes for efficiency.

Leverage automation to enhance efficiency in financial goal management. Automation can handle invoicing, expense tracking, and financial reporting, freeing strategic planning and decision-making time.

• Gain insights through data analytics.

Use data analytics to gain valuable insights into your financial performance. Check trends, identify opportunities, and uncover potential risks. Data-driven insights empower you to make informed decisions and fine-tune your financial strategies.

Final thoughts

Setting and tracking financial goals is essential for small business success. They provide clarity, motivation, and risk management, guiding your construction business toward growth and sustainability. By assessing your current financial situation, defining clear objectives, and breaking them down into achievable milestones, you can pave the way to success.

Remember to track and measure progress regularly, leveraging technology for efficiency and insights. With well-defined financial goals and a strategic approach, your construction business can thrive in today's competitive landscape. Start setting your financial goals today and watch your business flourish!

Contact us for further resources and guidance. Your business's financial success begins with proactive planning and strategic execution. Initial consultation is free, so let's talk soon.

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 managing 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

 

This Podcast Is Episode Number 485, And It's About Six Tips To Respond Effectively To Construction Client Complaints Complaints are an unfortunate part of running a business, but they happen. No matter how hard you work to please your clients, eventually, someone will have something negative to say. However, with the right approach, you can turn complaints into a valuable tool to strengthen your business.   When reviews are great, that's a fantastic thing. But unfortunately, when you get negative ones, you have to adjust. You can't please all customers all the time.  

Here are six tips for effectively responding to complaints:

1. Remember that this is not an argument

The reason that a client complains is a disappointment. It's a symptom of a need that wasn't met. They are not looking to fight with you. Taking the time to complain signals that they wish to continue the relationship. Don't muck it up by getting into a defensive, back-and-forth argument. Nobody wins in that scenario.

Your client is allowing you to continue working together. It's tough to keep calm when someone comes in hot with a complaint but remember: feedback is a gift. It just may not feel like it at the moment.

2. Listen

The key here is to put explanations aside. Listen until the client has said everything on their mind. Don't start thinking of how to respond while they are still speaking – they'll see your eyes glaze over the moment you do, and that will make matters worse. If it's a written complaint, read it over a few times to make sure you're not inserting a tone or accusation that may not be there.

You want and need to understand the complaint. Without this information, you can't move forward in any meaningful way. The moment for explanations and solutions will come. Take this time to really set everything else aside and just listen.

3. Repeat what you heard

It's essential to give the information back to the customer to ensure you're on the same page. Make sure you understand the complaint by saying it in your own words. A lot can get lost in translation, so let them know that you hear them.

This lets both of you know that you hear and understand the problem. Once they acknowledge that you've got it right, you'll be able to get to a solution.

4. Acknowledge

Forget for a moment that you're defending your construction business. Try to imagine how it would feel to be the one making the complaint. You should be able to identify what need wasn't met or how you disappointed them.

When you put yourself in their shoes, it becomes clear what solution you expect. You will also be able to see where you fell short and how you can avoid doing that to others in the future.

5. Offer a solution

After the work you've done to understand the problem, finding a solution will be the easiest. You know what you'd expect as a customer and what you can offer as a business. This information will create a solution that makes both parties feel good.

Let them know sincerely that you want to make it right. After all, this is your business, and reviews spread faster and further when they're negative. But, when a company goes out of its way to fix a problem, people enthusiastically let others know about it. 

6. Follow up

This may be the most critical step and is also often overlooked. After some time, follow up personally. This shows your client that you care about the outcome and want to ensure they're doing well with the solution.

They will remember the time and attention you put into ensuring they were satisfied. They will also likely come back with more business and refer you to others. It doesn't take long, but the effort goes a long way.

Likewise, if you receive a bad online review, don't panic. A bad review or two isn't likely to ruin your reputation. On the contrary, a few negative reviews can help you gain trust with potential clients. In addition, you can use the situation to build confidence in your business by being responsive, transparent, and honest. Many prospective clients will look past a few negative reviews if you have more favorable ones. So ensure you consistently provide quality services and encourage happy clients to post a good business reviews.

If possible, ensure your responses include:

• An apology.
• A statement about your commitment to your clients.
• A way to continue the conversation offline if further communication is needed.

Doing so will show potential customers and clients that you care about their feedback and are willing to take responsibility, but it also allows you to move the conversation to a more private forum if the reviewer isn't happy with your response. 

Final thoughts

Nobody likes to see a complaint come in at their business. We all work so hard to make sure we're providing a valuable service that is truly helpful, and knowing that we let someone down can be challenging. However, take it as an opportunity to become even better, and you'll find that your construction business continues to grow.

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

This Podcast Is Episode Number 484, And It's About Power Up Your Construction Company Payroll Processes Payroll is one of those things that starts quite simple. You build your construction business, hire a few employees, and things tick along pretty well. It’s straightforward enough to keep everything in line at first, but what happens to most companies is that they grow!   However, having an employee is different than when it’s just you meeting the client, doing the work, and collecting the money. The dynamics change when you hire that outside person. You need to be even more cautious when considering hiring a friend or family member instead of a stranger because success has a thousand fathers while failure is an orphan! Success or failure could mean choosing between peace and harmony in your personal relationships or giving away a portion of your hard-earned fruit.  

Paying must run smoothly as an essential aspect of your construction business. This is a great thing, but it also means that payroll becomes more complicated. Getting paid is, after all, the primary reason that most people come to work.

Here are some tips for managing payroll effectively:

1. Simplify

Payroll is one of those things that can be overly complex, and the importance of simplifying it can’t be overstated. Many small and medium-sized companies have quirks about managing their payroll. This can make it difficult for somebody else to step in or train someone new.

Keep things as simple as possible wherever you can. One way to do this is by switching to direct deposit. This will drastically reduce the work put into issuing and tracking payments.

2. Schedule

At least once per year, and preferably more, your payroll professional must take some time to create a payroll calendar. This will allow them to highlight any dates that may cause a lag in your employees getting paid.

It will also allow you to plan for any potential shortcomings or issues arising from holiday closures or oddities in the calendar. Making a payroll mistake is a surefire way to lower employee morale, so it’s essential to be aware of these dates ahead of time.

Once compiled, distribute the calendar to your managers to communicate the information to their employees. This will keep everyone apprised of any potential delays in getting paid that may come up.

3. Automate

The computer can be your best friend. Finding the right software to help with payroll can automatically take care of simplifying and scheduling, freeing up valuable time for your payroll specialist.

It also eliminates the potential for human error in payroll processing and creates a crystal clear picture of your finances. Many options available these days are easy to learn and straightforward to maintain.

4. Brush up

Payroll rules and regulations can change frequently and for any number of reasons. It’s important to stay informed on any changes in your region and proactively plan for them.

Much time can go into correcting a payroll error, so know what’s happening ahead of time to avoid this. With more and more employees being hired remotely, it’s also essential to understand any regulations that may pertain to those geographically located in a different area from your construction business.

5. Get help

There comes the point for all growing businesses where they have to outsource their payroll processing; if this is you, congratulations! It is truly a milestone.

There are many options out there as far as hiring a payroll specialist is concerned, and many of them are available online. Choose the one best suited for you without leaving your desk. This takes the pressure off of you to know all the nitty gritty details about payroll processing. By hiring an outside professional, you can be sure that your employees will be paid correctly and on time.

Everything runs smoothly during your regular pay schedule when timecards arrive on schedule. When employees do not turn in their timecards on schedule and expect you to have their checks ready, no worries, we have you covered:

• Process payroll outside your regular pay schedule fast and easy
• Track and allocate garnishments
• Track and report on employee loans
• Track and report on employee reimbursements
• Everything for one flat fee and no long-term contract 

Final thoughts

Payroll is most effectively managed when it’s simple, straightforward, and coordinated. Prospective applicants must complete a formal employment application and the hiring process before working on the job. When it starts getting tough to keep it that way, it’s likely a sign that your company has grown and you’re ready for more robust support.

You went into the construction business for various reasons; in most cases, Calculating and Processing Payroll is not one of them. Stop the insanity and let me know how I can help you today.

This Podcast Is Episode Number 483, And It's About The Value Of Client Happiness And Ways To Keep Your Construction Clients Happy

 

Construction business owners know that to find a loyal client base, they must stand out from their competitors. One of the best and easiest ways to do that is to have outstanding customer service. How you treat your customers reflects your entire business. People think positively about companies that treat their customers and clients well.    Unfortunately, many small construction business owners focus much on their products and services, with customer service remaining an afterthought.    Take time to learn more about your customers.  

Do they mention family members? Ask about their loved ones. Do they have particular concerns? For instance - too many cable cords around the house, and they have small children. Keep track of their issues and be attentive to their needs. Recommend solutions that address their specific problems. Go the extra mile to show your customers they're important to you. 

Ask for their input, as well. They'll get to know your products and services and offer insights into what's working and what could be improved. If you engage them--and make changes based on their feedback--you'll develop a loyal customer base.

Happier, high-profit clients are encouraged to return because they'll appreciate your thoughtfulness and value your service. The more special your clients feel, the more likely they will hire you again. 

The Value of Happy Clients

Happy Clients Are Returning Clients

Returning clients are fantastic for business. It's less expensive to bring back a happy customer than to attract a new person to your business, and existing customers are more likely to purchase or do business with you than new ones. Some reports suggest loyal clients can be worth as much as ten times their initial investment. So by keeping your existing customers satisfied, you not only save on marketing costs, you increase your chances of making money in the future.

Excellent customer service makes your customers feel important. You can have a fantastic product or service, which will go a long way to building your business, but your customers will also remember how you treat them. If you treat them well, they're more likely to be satisfied with their experience, which will keep them coming back. Even better, exceptional customer service can smooth things over and convince them to continue doing business with you if someone has an issue with your product or service. 

Happy Clients Tell Their Friends

It's not just that a happy customer returns; your happy client will tell their friends, and their friends could also become satisfied customers loyal to your business. They, in turn, will say to their friends about you. The pattern will repeat itself over and over.

Marketing costs money. Word-of-mouth is free, and it's far more valuable than advertising. People trust their friends when they recommend a product or service much more than they believe in an advertisement. Offering exceptional customer service is one way to build loyal customers who will tell their friends and colleagues about you. 

Happy Clients Write Positive Reviews

Happy clients don't just tell their friends how happy they are; they say it to the world through online reviews. Whether posting a review on Yelp or Google, thanking you on your Facebook or Instagram page, or gushing about your fantastic customer service on Twitter, customers can reach their friends and friends of their friends and, in some cases, strangers. If they talk publicly about how happy they are with how you treated them, others will see that and come to your business. 

Final thoughts

Asking questions is vital to get important information from buyers by helping you understand their needs, priorities, and problems. By showing prospective clients you can listen to and understand their needs, you build an essential connection that will help you provide them with solutions. That connection may also be what keeps them coming back to your business.  

Encouraging repeat customers makes solid business sense. To be successful, you need a balance of new and long-term clients. This means building relationships with people, personalizing your attention, sharing relevant information, and remembering your loyal customers. 

A great product or service at a reasonable price might bring your customers in, but outstanding construction customer service that gives them a positive, memorable experience will keep them returning. 

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

 

 

This Podcast Is Episode Number 482, And It's About How To Prevent Employee Theft In Your Construction Company

Recent employee theft statistics are increasing, and small business owners are more vulnerable to the problem. The most common embezzlement methods include billing fraud, cash on hand, and check tampering.

You may not know how employees can steal from you as a construction business owner. Some standard methods include:

• redirecting company checks to personal accounts and altering entries to cover up the theft
• undercounting change to customers and keeping the balance
• seeking reimbursement for non-business related expenses or 
• pocketing inventory or supplies.

Just as you can't be 100% secure all the time, there is no way to eliminate 100% of the embezzlement in your contracting company. However, you can limit your losses and avoid most of them with suitable preventative measures.

As a small construction business owner, you may not have the significant security budget of a large company, but you can combat employee theft with these simple strategies:

1. Do your due diligence when hiring.

This may be one of the most critical steps to combat employee theft. Screen all potential employees carefully. Look into employment history, call references, and run a credit check. Hire someone else you feel comfortable with. Above all, trust your instincts. If you sense someone might risk your business, don't give them the benefit of the doubt.

Construction Bookkeeper Embezzlers come of every race, creed, color, gender, and age. There is no definitive profile or absolute way to know which contractor bookkeeper is an embezzler until they have been caught and convicted. Even then, if you do not perform extensive background checks, you may never know it until it is too late.

2. Identify and eliminate opportunities to steal.

Think of any opportunities where staff have unsupervised access to sensitive financial data, cash, or anything of value – then brainstorm how you can minimize the risk. For instance, ensure no employee signs any checks. Restrict access to financial records and change your secure company passwords often.

We recommend opening three separate checking accounts - one for your central operating funds, one for payroll with just over enough to clear all outstanding payroll checks, and one for the owner's debit card purchases.

3. Conduct ongoing audits

In addition to having an annual third-party audit, it's wise to perform random internal audits every few months to spot fraudulent activity early. Your bookkeeper or accountant can help you maintain accurate numbers and flag transactions that appear suspicious. 

If you have a cash drawer, balance it daily like a bank account. Bookkeepers who develop the habit of embezzling usually start with taking small amounts, often from petty cash. Keeping track of small amounts of money can help save considerable amounts from disappearing.

4. Keep a close watch on inventory and supplies.

Invest in an automated real-time inventory management system or take time to monitor your office supplies and tools in your trucks. Check your records regularly to catch any discrepancies in your physical inventory and recorded data. 

5. Invest in security measures.

 It only makes sense that when the staff knows they're being watched, they're less likely to steal from you. Critical areas for video surveillance include storage space for inventory and supplies and offices where financial data is kept.

Final thoughts

There is a lot of work here, but it could save you thousands, if not hundreds of thousands of dollars. One of the best ways to limit your exposure to bookkeeper embezzlement is to outsource your contractor's bookkeeping services to us because we handle all of the construction bookkeeping services chores and never touch your money.

Although it's essential to do everything you can to eliminate opportunities for staff to steal from you, one of the most effective ways to avoid employee theft is to nurture a positive relationship with your team. 

It is much harder to steal from people you know. So take the time to interact with your employees, fostering goodwill with the people who work for you. A friendly environment where people care about each other creates an atmosphere where criminal behavior is less likely to occur.

One final tip: give your staff a way to safely and anonymously report suspicious employee activity. Your staffs are the eyes and ears of your business, but they may not come forward with incriminating information unless they feel safe doing so. 

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

This Podcast Is Episode Number 481, And It's About Common Construction Contractor Bookkeeping Issues With Accounts Payable Accounts Payable keeps track of the bills owed to a supplier or subcontractor.   A proper Construction Contractor Bookkeeping System uses the Accounts Payable feature to track unpaid 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. Again, the banker wants to know how long it takes to pay your bills.   Another reason to keep a proper Construction Contractor Bookkeeping System is to be sure you did not overpay a supplier or subcontractor, cell phone, the internet, liability insurance, vehicle insurance, and more.   The bills keep coming depending on your payment schedule; you may receive the past reminder notice before the original invoice arrives. Some utility companies have a history of what appears to be randomly sending the original bill.  

When you do not immediately pay the invoice, some insurance companies will mark this as late and subject you to a late charge. Based on where the Out of State payment needs to be mailed to, it may be impossible to send (by regular mail) and be received on time. 

Hence – Online Payments are Accepted. The benefit to The Contractor is proof that 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 subcontractors can quickly happen if checks are written on the job site. When using handwritten checks, use "Carbon-less Checks" to have a written record of payments made. The charges can be added to the Bookkeeping System without waiting to clear.

Bookkeeping Issues

Sometimes Accounts Payable will have transactions in Accounts Payable that do not belong there. It is easy to put transactions in the Accounts Payable (A/P) Aging Summary and then forget about them. QuickBooks does not automatically look to see if you put something in Accounts Payable when writing a check.

Short-cutting and putting in a bill will distort the financial statements and will not have a clear understanding of details. For example, credit card balances or monthly payments. Credit cards like checking and savings accounts must have all their transactions entered and reconciled.

Taxes due to the Internal Revenue Service, State, and Local Payroll taxes or Sales tax-related obligations. Employee or owner's child support payments do not belong in Accounts Payable.

Payments to and from the company and between owners are Owners Draw, Loan to Members, or Loan To Shareholder, and related transactions do not belong in Accounts Payable because you are not an outside vendor.

Do not create a bill for the company to pay. Anytime it is a company expense, the company should pay direct. There is nothing messier than constant reimbursements to the owner by the company. A bill with no detail looks like a bogus payment to the owner trying to make money out of the company that is being masked as an expense.

The old saying "Devil In The Details" Transactions in QuickBooks need to be explainable without any need to have a story problem to go with it. The Memo line in QuickBooks is short for a reason – less is better and more transactions are better than fewer transactions. Annual tax returns are many pages giving the detail (which may be stated repeatedly on numerous pages). As with Accounts Receivable, the same type of detail applies to Accounts Payable (A/P) Aging Summary.

Are the transactions Current, 1-30, 31-60, 61-90, >90 and Total?

Add in the dimension of payment can be done from multiple banks and credit card accounts, and in the case of suppliers, Credit may be applied. Any time there are unpaid balances, the first place to look is, did the amount get paid directly from the checking account? Was the amount slightly different (including a late charge or additional vendor bill not entered into QuickBooks)?

Again if transactions are in as Accounts Payable, they should not appear to be overinflated expenses. To be in QuickBooks under Accounts Payable, the transaction is entered as a bill. Any payments paid directly by the checkbook do not automatically know that a bill has been created. Same with any payment made with a credit card; there is no link between the credit card payment and the bill unless QuickBooks is told the bill was paid by credit card. 

Negative numbers in the Accounts Payable (A/P) Summary mean that the vendor was paid as a bill without any bill being entered. The Accounts Payable aging report reflects how long it takes you to pay your bills.

Unless you have won the lottery (which we all want to do), you must collect before paying your bills. The favorite way for Contractors to pay their bills is to Collect a job deposit, buy a new vehicle, tools, or equipment and then pay any outstanding invoices. When paying Old Bills with New Money (not money collected from the job that the bills were associated with) is "Robbing Peter To Pay Paul" (author unknown).

I get it. It is a more natural number to know. How much the customer owes you (especially if the job is Time and Material or Cost Plus) is hard. Not all of the bills may not have arrived from your Vendors or Subcontractors. 

Then there is the issue of how you billed. Was it straightforward for the customer to pay you? You may forget or forgive the bill and receive payment from your customer, but it is unrealistic to expect or hope that your Vendors, Suppliers, or Subcontractors will do the same. What is guaranteed is that the Bills will come and continue to occur.

Final thoughts

Bills, bills, and more bills are set up on auto-pay so they will get their money. The question is, how will you pay the bills? When will you pay the bills? Are you paying with Income from Customers? Credit Cards racking up your debt? The line of Credit which, again, is racking up debt? Personal savings or investments? (borrowing from tomorrow to pay for yesterday) Borrowing on your House? Borrowing from a Pay Day Type of Lender (some take repayment daily automatically from your banking account)? Borrowing from the Government by not filing and paying by the due dates?

Keeping up and paying bills is a challenge in the best of times. With proper bookkeeping, you can know: Whom You Owe, When Your Payment Is Due; if you plan, you can pay the balance in full. Moreover, my favorite is not double pay if it can be avoided.

It is a big deal to know the rules. Sometimes asking for a payment plan is the only option. If it is necessary, ask nicely, ask politely, ask as long of time pay as possible, for as small of a monthly payment as they will give you. It is better to double up on a low payment (to pay off sooner) than have a large payment that is impossible to pay. 

Again, I am here to help you a little or a lot, depending on your construction business needs. Schedule your free consultation here.

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

 

This Podcast Is Episode Number 480, And It's About How To Make Xero Accounting Work For Your Construction Business The key to making Xero Accounting Online work is ensuring your account is correctly set up and maintained. Perhaps you own a service and repair firm specializing in plumbing, electrical, HVAC, or maybe a handyman service or someone who does small construction projects that last from a few hours to a few days, and you only need to give your customer or client one invoice?   Suppose you've just started working with Xero; making a few mistakes while learning is expected. We see pretty common errors - and unfortunately costly - so you should be aware of them if you want to get the most out of Xero's powerful cloud accounting system.   

Not connecting all the bank and credit card accounts dedicated to your business

Make sure that you keep all your construction business bank and credit card accounts synced to Xero to ensure that you don't miss any sales or expenses in your reports.

Also, ensure that you separate your business accounts from your personal ones to avoid hassles during tax season. Doing this also helps you make accurate business decisions. Trust us, your accountant and bookkeeper will thank you!

Not reconciling the bank account in Xero to bank statements

Run a reconciliation report in Xero regularly and then compare it to your bank statements to ensure there aren't any errors or duplications. 

Many business owners miss this critical step, which means they look at inaccurate or incomplete data when they check their reports.

Not checking user access and permission levels

Many business owners give key team members full access to their business' Xero system and don't review the user permissions at all. 

However, the best practice is to provide access on an "as needed" basis and review who has access to the system and what permission level they have quarterly. 

Also, when your staff members leave, you should revoke their Xero access immediately. 

Not setting financial SOPs (Standard Operating Procedures)

Create a proper financial SOP that describes who is responsible for what and by when and the step-by-step process of getting things done.

For instance, you can assign your operations manager to run the aged receivables report in the system, so you'll know who owes your construction business money. Then, map out a clear action plan of what happens in specific scenarios, such as a payment that's two weeks late. You can also have standard replies that the team can send as needed.

Mishandling transactions when you've paid with your personal money

Many construction business owners don't know how to handle transactions using their personal accounts when paying for a business expense. There are actually ways to capture such costs paid on the wrong card in Xero so you can still claim the tax deduction.

You may need to get in touch with your advisors to make the adjustments accordingly. 

Xero Accounting Online saves us time in data entry, which means we can offer contractors bookkeeping services at substantial savings over QuickBooks bookkeeping services and provide more in-depth financial reporting, with some of the reports being updated within seconds of when the transactions are received.

Avoid Xero Mistakes By Working With A Specialist Advisor

The best way to ensure that you're taking full advantage of all the features in Xero and avoiding costly financial mistakes is to work with an experienced advisor who knows the ins and outs of this cloud accounting system. 

We're Xero Certified and would be happy to look at your file to give you some suggestions. The time, effort, and money you've put into running your construction business is a testament to your commitment to this industry. So, let me end this post by telling you to do what you do best and outsource the rest. The "rest," as you know, is where your cash flow and profit depend – construction bookkeeping and accounting.

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

 

This Podcast Is Episode Number 479, And It's About Ways Reasons Why Contractor Startups Fail And How To Avoid Them Many surveys and reports show that nearly half of all new construction companies close their doors within the first five years of opening them. When we speak with contractors who failed, most say it was due to a lack of cash flow. It was pretty obvious, yet when questioned, all of them said they were "Blind-Sided" and were not aware they were running out of cash until it was too late.   There is a point when a contracting company starts to fail, and nothing short of a massive cash infusion can stop it, and a domino effect begins, which is when a series of similar or related events occur as a direct and inevitable result of one initial event.   Planning is essential to give your business the best chances for success. Planning means anticipating challenges and developing ways to successfully address them, so they don't upset your startup.   

Here are three reasons why contractor startups fail and ways you can avoid them. 

Lack of market demand

Before spending your time, money, and energy starting a construction business, make sure there's a need for it. You need to have a market to make money. That means there needs to be enough people who need your product or service and are willing to pay money to buy or use it. Without that, you won't be able to cover your costs or earn enough to survive. 

Some ways you can identify need:

Look for competition. If no one else is offering the service, there's a chance there's no market for it. That might not initially stop you from moving forward, but if no one already offers your product or service—or anything close to it—you'll have to do more to prove there's a market. 

Conduct market research. Studies and interviews help determine whether people in your target market agree with you that there is a need for your offering and that they would pay for it. 

Lack of expertise

Entrepreneurs might be tempted to partner with or hire their friends or family—people they genuinely like and would work well with. That doesn't always translate to success, however. For your business to succeed, you need specific expertise and people whose skills complement yours. 

It would be best if you also had people willing to discuss your decisions with you and ensure there's a business case for each decision you make. Someone with a differing perspective provides a vital way to double-check whether your choices are best in the long-term for your business or whether other options are available. 

Ensure you hire people with balanced competencies. If your roofing business involves installing solar panels, you might need a technical expert to ensure the technology runs smoothly. You'll likely also need a financial expert to help you with bookkeeping and possibly a manager to oversee employees.

Hiring people you like is fine, but make sure your team also has the skills to manage your business successfully. 

Lack of finances

You need money to produce your services and ensure all employees are paid, including you. It's not enough to know how much money you need month-to-month; you need to forecast your development cycle, how inventory moves through your supply chain and variations in seasonal income. 

If your construction business doesn't earn as much in the first few months as you predicted, you'll need to bring in more money quickly to save your business. 

Lack of cash holds up material deliveries, which causes labor to be idle and continue costing money, and then payroll checks bounce, and your construction workers take your tools and equipment to the pawn shop to get paid that way, and the contracting company spirals down to its end.

One accounting tip that could help your new contracting business is opening three business checking accounts.

If you were to ask contractors about the big mistakes they made when they started, they wished they had kept their business and personal expenses completely separate. Not only does it make day-to-day contractor bookkeeping easier, but it also makes monthly, quarterly, and annual tax preparation smoother.

Checking Account 01 - Your primary checking account should not have any credit or debit cards attached to it. All money is deposited into this account, and you make transfers into the other two versions as needed.

Checking Account 02 - The payroll checking account should have just enough money to cover payroll with perhaps a tiny cushion of $100. You can transfer funds into this account as needed from your primary account without needing paper checks. This limits exposure to payroll fraud, and this account should not have any credit or debit cards attached to it.

Checking Account 03 - Petty Cash checking account with $500 +/- this account should have debit cards that work like credit cards attached to it for making small purchases in the field; if you want to provide your foreman and forewomen with a debit card to be used as a credit card you can. You can transfer funds into this account as needed from your primary account without needing paper checks. NEVER give out the PIN.

Final thoughts

Develop your business plan. Focus on the best areas to innovate or improve. By planning, being strategic with whom you hire, ensuring a market for your offerings, and with construction bookkeeping and accounting done right, you can significantly improve your odds of success. Know that in time your company will become legendary to such a degree that your clients will be raving fans, and referrals will be part of your marketing strategy.

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

This Podcast Is Episode Number 476, And It's About What Every Contractor Needs To Remember When Negotiating Contracts Several aspects of the construction business can only be learned through experience. One of them is negotiating contracts.   Most people fear the negotiation procedure because it is an intrinsically uncomfortable process. Asking for more money or making personal demands doesn't come naturally to everyone. But with the right toolkit, you can breeze through contract negotiations. And you'd better get used to it because you'll have to handle many contracts whether you're a construction company owner or employee.   Having the right mindset is critical to contract negotiations. You have to believe that you are going to get your way. Bring a positive attitude and a smile to the table. You're not signing contracts with the enemy. The people you're negotiating with will be your business partners in one capacity or another.  

We recommend seeking the advice of a qualified construction attorney to put together a contract that fits your specific needs. Your contracts need a well-defined scope of work, clear payment terms, a reasonable schedule, and a proper change order clause. No work should ever be performed based on verbal agreements. Get everything in writing, always, no exceptions.

Let's take a look at some things you need to remember when you're in the process of negotiating contracts:

• Be patient

Don't rush to get a contract signed. Rushed arrangements usually leave one or both parties dissatisfied. It's understandable if you want to get the negotiation done, but taking the extra time to examine your contract will benefit you tremendously in the long run.

• Involve an expert

You might know what you need from a contract regarding overall business output, but you could get trapped by the legalese. Get a lawyer you trust on board to frame the wording in a way that protects your overall interests. Even if you're good at negotiation, involving an expert is always a good idea.

• Don't forget term sheets

Term sheets are a broad overview of the terms of your contract. Before you get into the specifics, it's a good idea to ensure that all parties agree on the big picture.

• Take it one step at a time

Negotiating a complex and lengthy contract is an inherently tedious process. In the beginning, ensure you've agreed upon the necessary details. Making some headway is crucial to the overall success of the negotiations. After establishing a rapport with the other party, you can dive into the deeper, more complicated issues.

• Think about the specifics

The flowery language on a contract might make for good reading if you're of a particular leaning, but you need to understand what it translates to in the real world. How much will you be making?

• Use the phone

Emails are notoriously difficult to decipher at times. You aren't aware of the sender's body language, and sometimes people can confusingly word things because they don't have the best command of the language. If you're unsure about some issues in your contract, pick up the phone, and have a conversation. It will help sort things out.

• Don't fret too much about the first draft

The first draft of your contract is just a starting point. It's called a 'negotiation' because you will be changing certain aspects of the contract. Don't be alarmed if there are certain things in there which aren't to your liking.

• If you can't make the tough calls, get someone who will

If you're not naturally assertive or find it challenging to be demanding when the situation calls for it, ask for help from someone capable. It could be your business partner or even a spouse.

• Do your research

You don't want to make outlandish demands that the negotiating party can't afford. Take some time and do your research. See what similar services or products cost in the industry. Ask some construction experts for advice.

Final thoughts

It's worth repeating that you should always take care to state clearly in writing the terms of your quote or estimate and offer a client the opportunity to ask questions before approving the work. That way, both parties can avoid misunderstandings about expectations and project costs before the work begins. 

Negotiating a contract is like a long game of chess, except both parties need to come from the table victorious. Before you begin the process, figure out your short- and long-term goals. Having a clear vision will help you better navigate the tricky waters of contract negotiation.

While nobody knows your contracting business as well as you do, seeking expert financial advice right away is crucial for your survival. For a free initial assessment of your business, please don't hesitate to contact me.

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

This Podcast Is Episode Number 477, And It's About Ways To Sustain The Life Line Of Your Construction Company

 

Cash flow refers to the movement of money into and out of your business. It's based on the amount of money you bring in minus the amount you spend. A positive cash flow means bringing in more than you're spending. A negative cash flow means you aren't bringing in enough to cover your expenses.   Your construction company can run into problems by not charging enough for goods or services, having late-paying clients, growing too quickly, or simply spending too much money.   Solid cash flow management is vital to ensuring your contracting business survives, but not everyone understands what cash flow is or how to manage it. That's likely what makes it a leading cause of stress for small business owners.   

Cash flow can vary throughout the year, depending on sales cycles or whether you've made a large purchase. 

Here are three strategies you can use to gain control over your cash flow.

1. Understand your profitability

Managing your cash flow is excellent, but it won't help if your business isn't profitable. Determine where your business is most beneficial and where you're dealing with cost overruns. Look at your services to determine how much they bring into your business compared to how much you spend to provide them. Find any inefficiencies in your processes and eliminate them if possible.

A solid cash flow ensures you offer excellent goods and services and help you achieve your goals while reducing those negatively affecting your finances. You may need to increase your prices to reflect the cost of goods sold.

Similarly, take a look at your clients. Are there some that you are undercharging or spending too much time and energy on? Can you increase their fees or find higher-paying clients? (I have recently discussed these points in my Tuesday email. If you don't want to miss out, you can subscribe by filling out the form on the right).

2. Write a cash flow forecast.

Your cash flow forecast (a cash flow projection) predicts how your construction business will perform financially over a set period. It's a good idea to have a cash flow forecast for a year, broken down into quarters and months.

The projection considers your revenue and expenses over those set periods and helps you figure out how much you need to make in that period to cover your costs. It can also allow you to anticipate any upcoming cash flow issues, such as slower periods that may require you to cut back on expenses. If you have any anticipated big-ticket items you'll need to buy or plans to expand your business, include those in your forecast.

Periodically check your actual cash position against your projection to see how you're doing and if you need to make any adjustments.

3. Use technology to keep on track.

Plenty of software solutions can help you gain insight into your company's cash flow. They can help you build projections and get a real-time view of how your business is doing. This information can then be shared among company managers, so everyone knows how the company is doing financially and where strategies need to be put in place or altered to get you back on track.

Additionally, invoicing and project management software can encourage faster, more manageable client payments and keep projects on budget. This will also improve your cash flow.

What we can do:

A wise business owner once said, "Happiness is a positive cash flow." As a business owner, I'm sure you agree. Everything is better when your cash-in exceeds your cash-out.

A cash crisis can be emotionally devastating and even kill your business. You know what I mean if you've ever had to beg, borrow, and steal to cover tomorrow's payroll.

Having a proper cash management system allows you to:

• Know when, where, and how your cash needs will occur.
• Know what the best sources are for meeting your additional cash needs.
• Be prepared to meet these needs when they occur by keeping good relationships with bankers and other creditors.

The starting point for avoiding a cash crisis is allowing your accountant to develop a cash flow projection for you. Your construction accountant can help you develop both short-term (weekly, monthly) cash flow projections to help you manage daily cash and long-term (annual, 3-5 year) cash flow projections to help you develop the necessary capital strategy to meet your business needs.

Also, well-kept historical cash flow statements help you understand where the money went.

Accurate cash flow projection has several benefits and will make many procedures easier for your construction company. 

Our services can provide you with:

• Help in obtaining an appropriate line of credit
• Cash collection acceleration techniques
• Proven effective collection policies
• Established effective payment policies
• Help in getting the maximum rate of return on your idle cash

Cash flow is the lifeblood of any construction company and especially the ones with annual sales volume under $1,000,000. Some Construction Company experts even say that healthy cash flow is more critical than your contracting company's ability to complete projects! 

While that might seem counterintuitive, consider this: if you fail to satisfy a customer and lose that customer, you can always work harder to please the next customer. If you do not have enough cash reserves to pay your suppliers, creditors, and payroll, your Construction Company is out of business; game over!

Final thoughts

Many business owners find cash flow management stressful, but with a bit of information and planning, and by using the right tools and the right construction accounting consultant, you can have better insights into your company's financial situation. Those insights will help you make better decisions for your business and gain control over your Construction Company cash flow.

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

This Podcast Is Episode Number 476, And It's About How High-Profit Jobs Can Make Or Break Your Construction Company Knowing which jobs have the highest probability of success and profit before getting involved moves your construction company from an unpredictable roller coaster to a peaceful merry-go-round.   You have what appears to be a high-profit job, and now you think you have it made, and I hope you are right!   The problem is that high-profit jobs can turn into low or no-profit jobs. In some cases, they can bankrupt your construction company because you bid on the project using whatever model you are accustomed to using, and in the end, you wind up with cash flow problems.  

Many problems can be traced back to the "Halo Effect," which happens when a contractor thinks, "We are so good at (fill in the blank) we should expand into (fill in the blank). 

The most common situation is when a residential remodel contractor who has built a reputation and a substantial company generating profits of 15% or more decides to start building custom homes. Or the opposite, a home builder who decides to branch out into residential remodeling.

Home Builder Doing A Residential Remodel

The processes, tools, equipment, materials, skills, and invoicing procedures required to modify a home with people living there are entirely different from building a house from the ground up.

New construction workers are more like cave people with a brute force mentality. If something doesn't fit or will not work the way they want it to, they use more brute force until it does. Every problem has one answer "Brute Force."

The same goes for managing sub-contractors and suppliers. The home builder bids on a residential remodel project using the exact square foot costs they have continuously operated in building houses and quickly discovers the true meaning of "Hidden Costs."

These costs include dry rot, cracked foundations, broken plumbing, bad wiring, worn-out HVAC, and other unpleasant surprises.

Homeowners living in the house while the remodel is happening do not ever want to be without water, lights, heat, and privacy, and they don't know how much debris, dust, and noise is involved in a remodel.

Homeowners want to believe everything is included in the original contract price, including the little extras they think of along the way. When it comes to change orders, that is something most home builders do not understand. They don't have a process for tracking them, let alone pricing and getting paid for doing them.

Most trade contractors and subcontractors who work on residential remodel projects understand change orders and know how to apply pressure on the builder to get paid. Too often, the main reason home builders go bankrupt is cash flow issues.

Residential Remodel Contractor Building A Home

The processes, tools, equipment, materials, skills, and invoicing procedures required to build a house from the ground up are entirely different from modifying a home with people living in it.

They understand brute force will not work, but patience, planning, and being respectful do. Randal spent a few years in residential remodeling, and it did not take long to learn that new construction behavior does not work in residential remodeling.

The remodeling contractor uses a form of "Cost Plus" or "Not To Exceed" to provide the homeowner with the scope of work and a contract price the bank needs to finance the construction. That process can work for a residential remodel because the house is already in place, which helps define the size and scope of the project.

The size and scope of the homeowner's dream house are limited only by what the building codes will allow.

When the labor, material, other costs, and subcontractor bills pile up, the remodeling contractor asks for a construction draw and is told the bank needs a Pay Application filled out and submitted. Then it will take a while for the bank inspector to review the project and approve the draw.

This is when the remodel contractor figures out they are providing all the labor, material, other costs, and subcontractor expense up front and getting paid only when and if the building inspectors, architect, bank, and the client agree to the draw request.

The Solution

For your construction company to survive and thrive in any economy, you must pick a niche market and develop your Strategic Business Process Management System (BPM) with written goals of what you want to accomplish and how much money you want to earn from it.

Once you have picked your construction specialty, stick with it no matter what, and in the end, you will have the best chance of making money and retiring wealthy. All contractors who try to do the right thing deserve to be wealthy because they bring value to other people's lives.

Lost and tired of your bookkeeping system? If you are using QuickBooks and doing your books (or have staff doing it for you), I recommend you head to our Construction Accounting Academy site and check all available classes immediately. Master the skills needed to generate useful reports, repeat quality performances, and make informed decisions to operate and grow your construction company.

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

This Podcast Is Episode 601, And It's About The Delegation Mindset: Empowering Your Construction Team

 

Delegation is a skill often discussed but rarely mastered, especially by small construction business owners wearing multiple hats. The balancing act of managing daily operations while pushing for growth can be overwhelming.    Imagine if you could free up hours in your day to focus on strategic decisions rather than getting bogged down in every minute detail. This is where the art and science of delegation come into play.    Understanding and implementing effective delegation strategies can enhance productivity, foster team growth, and drive your business forward.  

What is delegation?

In essence, delegation assigns responsibility and authority to others to complete tasks. It involves more than just delegating tasks; it's about empowering your team with the right resources and support to achieve goals efficiently. But why is it seen as both an art and a science? The art comes from understanding your team's strengths and how to motivate them, while the science involves the systematic approach to distributing tasks effectively.

Why does Delegation matter?

Delegation is crucial for construction business owners seeking efficiency and growth. Time saved is money earned.

Here are some compelling reasons why it should be a part of your management toolkit:

• Increased productivity: You can concentrate on high-impact activities requiring expertise and oversight by delegating tasks.
• Skill development: When you entrust tasks to your team, you allow them to learn, grow, and become more skilled.
• Enhances trust and collaboration: Delegating tasks builds mutual trust between you and your team, boosting morale and cooperation.
• Promotes innovation: With more autonomy, team members are encouraged to think creatively and propose innovative solutions.

Types of Delegation

Understanding the different types of delegation can help you apply the right one to a given situation:

• Task delegation: Assign specific tasks that require completion within a set timeframe.
• Responsibility delegation: Hand over entire processes or projects, giving your team ownership and accountability.
• Authority delegation: Allow team members to make decisions that affect their tasks, boosting engagement and empowerment.

Pitfalls of Delegation

Like any other management skill, delegation comes with its set of challenges. Knowing what these common pitfalls are can help you avoid them:

• Micromanagement: Overseeing every aspect of delegated tasks can undermine your team's confidence and independence.
• Lack of clarity: Vague instructions can lead to confusion and errors in task completion.
• Fear of losing control: Worrying about the outcome might prevent you from effectively delegating essential tasks.
• Time constraints: Feeling rushed can lead to improper delegation, affecting quality and team morale.

How to delegate effectively

Effective delegation isn't a one-size-fits-all solution. Here are steps to help you delegate successfully:

1. Identify tasks to delegate

Start by listing all the tasks you currently handle. Identify which tasks can be transferred to others based on their complexity and your team's capabilities. Routine and time-consuming tasks are prime candidates for delegation.

2. Choose the right person

Match tasks with the right person by evaluating their skills, experience, and current workload. Consider their interests as well to ensure they are motivated and engaged.

3. Set clear expectations

Communicate your expectations. Outline the task's purpose, desired outcome, and deadlines. Ensure that your team members understand the level of quality and any constraints they might face.

4. Provide resources and support

Equip your team with the necessary tools and training to complete their tasks. Offer your support and be available for guidance to ensure they feel confident in their roles.

5. Monitor progress without micromanaging

Check-in regularly to offer feedback and ensure tasks are on track, but avoid micromanaging. Trust your team to complete their assignments, and encourage open communication regarding issues or questions.

6. Celebrate successes

Recognize and celebrate achievements. Acknowledge your team's hard work and contributions to foster loyalty and motivation.

Overcoming delegation challenges

Even with the best intentions, challenges can arise when delegating. Here's how to tackle them:

• Building trust: Invest time in getting to know your team. Be transparent, show appreciation, and provide opportunities for growth to strengthen trust.
• Effective communication: Develop a culture of open dialogue by encouraging questions and clarifying expectations regularly.
• Managing fear of failure: Start by delegating smaller tasks to build confidence, gradually increasing complexity as your team grows more comfortable.

Delegating by Outsourcing

Delegating your bookkeeping and accounting to a construction bookkeeper offers several benefits that can significantly enhance the efficiency and effectiveness of your business operations.

Here are some of the key advantages:

1. Specialized Knowledge: Construction bookkeepers possess specialized knowledge of the industry and are familiar with its unique financial practices, regulations, and challenges. This expertise ensures accurate financial reporting and compliance with industry standards.

2. Time Savings: Bookkeeping can be time-consuming, especially for small construction business owners who already manage multiple responsibilities. By delegating this task, you free up valuable hours to focus on strategic activities, client relations, and overall business growth.

3. Increased Accuracy: Professional bookkeepers are trained to handle financial data meticulously. Their expertise minimizes the risk of errors in bookkeeping, reducing the likelihood of costly mistakes and the stress of potential audits.

4. Better Cash Flow Management: A dedicated bookkeeper can help monitor your cash flow more effectively, ensuring you understand your financial position clearly. They can provide timely insights on receivables, payables, and budgeting, which is crucial in managing project costs.

5. Enhanced Reporting: Construction bookkeepers can generate detailed financial reports that provide valuable insights into your projects' performance. They can identify trends and areas for improvement, enabling you to make informed decisions about your business.

6. Compliance and Tax Preparation: Keeping up with tax regulations can be complex, especially in the construction industry. A construction bookkeeper can ensure that your financial records comply with rules and help prepare for tax season, potentially saving you money through proper deductions.

7. Risk Management: Outsourcing your bookkeeping tasks reduces the risks of mishandling financial information. A professional bookkeeper implements best practices for record keeping and financial controls to safeguard your business against fraud and errors.

8. Focus on Core Competencies: Delegating bookkeeping allows you to concentrate on what you do best – running your construction business. This focus can lead to increased productivity and better service for your clients.

9. Scalability: As your business grows, so do your financial management needs. A construction bookkeeper can quickly scale their services to accommodate your changing requirements, ensuring that your financial operations remain efficient and effective as your business expands.

Summing up

Mastering delegation is a process that blends art and science. It's about balancing control and trust, strategy and intuition. Implementing these strategies can transform delegation into a powerful tool that lightens your load, empowers your team, and propels your business forward.

Delegating your bookkeeping and accounting to a construction bookkeeper can improve accuracy, efficiency, and strategic insights, contributing to your construction business's overall success. By leveraging their expertise, you lighten your workload and position your business for growth and sustainability.

Ready to make delegation work for you? Start by identifying one task you can delegate this week and watch how the ripple effect of trust and efficiency begins to transform your workflow. If it's bookkeeping and accounting, we can help. Calling me will not cost you anything - other than your phone subscription and 30 minutes (more or less) of your time.

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 managing 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

This Podcast Is Episode Number 475, And It's About Proven Construction Business Processes When Creating Your To-Do List When you're a construction business owner, your to-do list is often long and constantly growing longer. You need to do many things, and it can feel like they're all urgent. In such cases, it's easy to push essential tasks to the side and focus on less-vital activities, but that often means you miss deadlines, make mistakes or always feel as though you're trying to catch up.   Construction Companies have two basic leadership styles; wait until an urgent situation occurs and react like a firefighter or develop business processes that allow the company to respond calmly and natural resources and solutions to the issues like a traffic police officer on a sunny afternoon.  

Firefighter Leaders - Operate in one of three mental states:

• Going into a crisis
• Coming out of crises
• Waiting for a crisis

Traffic Director - Leaders operate in one of four mental states:

• Preparing for new projects to appear
• Preventing projects from becoming an emergency
• Planning for implementation of current and future projects
• Empowering others and directing the flow of projects to completion and billing

The graph below - Is similar to the diagram shown in The 7 Habits of Highly Effective People - Habit 3 Put First Things by Stephen R. Covey to demonstrate this principle.

We spend our time in one of four ways, as illustrated in the Time Management Matrix above. This matrix defines activities as Urgent / Not Urgent / Important / Not Important. 

With this in mind, creating your business to-do list would be more straightforward.

Here are some ways for you to determine the most productive order to complete your tasks. 

 1. Know all of your tasks

It isn't enough to have a running list of tasks in your head; you need to write them out to see them at a glance. Take the time to list all your tasks, and break down large tasks into smaller steps. 

Write a list of the activities you need to do for the week—or even the next two weeks—on Monday morning. Include information such as how urgent they are, how long they'll take to complete, and their deadlines. 

Now you know what you need to complete and when things need to be done. 

 2. Determine what tasks are vital

There are many methods for determining which tasks are the most vital. We'll go into the Eisenhower Decision Matrix and the ABCDE Method.

In the Eisenhower Decision Matrix (similar to the graph above), you classify each task into one of four quadrants. These quadrants are based on whether the task is important, urgent, both, or neither. Tasks that are both important and urgent should be done first, followed by those that are either important but not urgent or urgent but not important, and finally, those that are neither important nor urgent. If possible, delegate tasks that aren't both important and urgent to someone else.

Another method is the ABCDE method, in which you assign each task on your list a letter from A through E based on its level of importance. Tasks with a level of A or B are the most important, while D and E are not at all critical. Anything from C down can likely be rescheduled or delegated to someone else. 

3. Schedule your tasks

Now that you know which tasks are the most critical, schedule your to-do list in that order. Write yourself a daily checklist that puts the most important tasks at the start of your day. Don't overschedule yourself, however. After all, there's a good chance that a new activity that is both important and urgent will arise in the course of your week, and you'll need the space in your calendar to address it. 

Give yourself deadlines in the day to get the work done based on a reasonable assessment of how long the activity should take you. You can also chunk your work, setting aside specific, uninterrupted periods to do focused work and then scheduling breaks around that. 

Make sure you turn off distractions and let your colleagues know you aren't available during those times.

Final thoughts

Large, profitable construction companies have known and used some form of Business Process Management (B.P.M.) for hundreds of years. We've always used M.A.P. to help our clients find the treasure hidden inside their construction business. You can download our free toolkit here if you haven't done so.

By determining which of your tasks are the most important to you and your construction business and scheduling your day based on that criteria, you can ease the pressure caused when you have a long list of activities to take care of.

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

This Podcast Is Episode Number 474, And It's About Bad Business Practices In Construction Bookkeeping One of the biggest challenges construction company owners like you have with an in-house bookkeeper is training them to work for your best interest, not theirs, and deliver consistent results and the reports you can trust daily, year after year.   Having been involved with construction and construction accounting and bookkeeping for over thirty years, we have seen a consistent pattern repeated over and over that will turn ordinary, decent, pleasant bookkeepers into a disheveled, broken, mean, nasty, arrogant trolls, and that's a good day when the sun is shining, and the birds are singing!  

Here's how it happens: 

• Someone is assigned the construction bookkeeping duties, and they are typically mild-mannered, shy, and unable to say no. The newly appointed "bookkeeper" opens the QuickBooks Pandora's box and loads the CD in the computer, believing it will be set up and ready to go in ten minutes. 
• That's when the first of several unpleasant surprises happens; the pop quiz. QuickBooks screens start popping up and asking questions! Nobody said anything about a test or an exam, and panic began to take hold.
• The bookkeeper thinks, "don't screw this up because I can't afford to lose this job!" The questions keep coming like a raging river, so to put the responsibility on someone else, the bookkeeper asks the contractor for help and is told: "I don't know, you're the bookkeeper. Go figure it out. I'm busy!"
• Luckily QuickBooks has a guided tour of QuickBooks setup; unfortunately, the bookkeeper charges forward, taking all the default answers suggested by QuickBooks, and in just over two hours, QuickBooks is set up horribly wrong.

Choosing the correct QuickBooks Version is the most critical part of all because it is the foundation upon which your entire financial system is built. Put the wrong foundation under your business, and it will not matter who is doing the bookkeeping because it will always be a mess, and you will never get the reports you really need to operate and grow your construction business profitably.

Contractors who do not earn much money see bookkeeping as overhead which costs money and therefore is a drain on profits, so they get a cheap computer, tiny monitor, garbage printer, tiny desk, and broken-down chair.

• The contractor assigns additional tasks to the bookkeeper to get their money's worth. "Go fetch" and do everything - like personal errands, delivering materials, supplies, and paperwork to the job site, handing over all usernames and passwords to buy and pay stuff, making coffee, answering the phones, taking out the trash, cleaning the bathroom—anything and everything to get "value" out of the time and money wasted on bookkeeping.
• Contractors can miss many deadlines but miss a payroll, and they are out of business. The day that happens, your staff is looking for a new job no matter what they tell you. The contractor gets angry, makes deep noises from the chest sound like important messages from the brain, and blames the bookkeeper for the missed payroll.
• What has now evolved into the incompetent bookkeeper will respond with something like: "The time cards never arrived, so I could not process payroll!" The contractor simply responds with something like: "You should have figured out how to get them even if it meant using your car, your gas, your personal time and have gone to the job site and got them; it's your fault! I depended on you to do your job, and you let me down!"
• This is where the ordinary decent, pleasant bookkeeper starts growing an attitude, thinking you don't understand how complicated bookkeeping is with a program like QuickBooks that is all screwed up and won't work right! Getting anything done in QuickBooks is an immense fat royal pain, let alone all the other stuff the contractor wants to do.
• The bookkeeper thinks you don't know or care because you hired them to take care of the paperwork, and that is precisely what you did because in business, you produce reasons or results, and reasons don't count.
• Next, your vendors and suppliers don't get paid on time, or worse yet, you miss the 2% discount if paid by the 10th, which in effect means you are paying a 36% annual interest rate penalty, and when you ask why, the bookkeeper says they didn't have enough time to get the bills into QuickBooks.
• Next, the payroll tax returns, sales tax returns, labor and industries tax returns, business and occupation tax returns, city licenses, and liability insurance audits start slipping, and the fines and penalties add up.

These bad business practices can frustrate you or any construction business owner because you've now realized it is a costly mistake. These do not even include overpaying income tax, lost productivity due to stress, and several other unknowns.

Now you have three responses; fight, flight, or replacement. Fight and demand could get it done, but how reliable (your reports) will it be? Flight and hiring another in-house bookkeeper could only repeat the process. Or you can save time, money, and aggravation by outsourcing to a competent construction bookkeeping service. The choice is yours; consider it before allowing these bad business bookkeeping practices to drive you insane. Protect yourself and your business. As we always say, you deserve to be wealthy because you bring value to other people's lives.

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

 

This Podcast Is Episode Number 473, And It's About How Technology Helps Construction Businesses Save Money The use of technology in construction has come a long way. Many articles have already been written about how construction has been sluggish in adopting new advancements in technology compared to other business sectors. However, more and more companies, especially small construction businesses, have been open to using technology to improve their operations.    Any change is difficult–especially in business. Changing how things have always been done in the past involves a lot of effort, persistence, and flexibility, not to mention financial investment. To sustain the interest and efforts towards these changes, it's crucial to fully understand and not lose sight of the benefits of adopting technology. For businesses, increasing the bottom line and reducing costs are always practical reasons to leap.   

Here are the ways technology helps construction businesses reduce costs:

Pre-construction Process

From bidding up to gathering the materials and workforce required for a project, there are many inefficiencies that technology can solve. Relying on paper or even disparate systems can cost different stakeholders a lot of time and money in the pre-construction phase. 

Careful planning helps contractors prepare for a project where delays are minimized; budgets are accurately forecasted and adhered to, and, ideally, different apparent and hidden risks are identified and mitigated. This applies to various participants in a project. Planning is equally vital if you are a subcontractor or supplier to a big project. 

End-to-end project management software tailored to construction projects solves many of these issues. It also serves as a single source of truth for different participants in the project. Traditionally, most documents like plans and blueprints are in the form of hard copies, making it difficult to communicate changes and practice dynamic version control. The time spent passing on and confirming new information is necessary when dealing with paper references. These are eliminated when plans and documents are digitized. Not only is time saved, but errors and miscommunication are greatly minimized.

The transparency and efficiency resulting from embracing technology in the pre-construction phase pay off beyond the savings when plans are created. The increased efficiency and transparency also foster timely progress and early discovery of issues when the project is in full swing. 

Business Operations

For smaller contractors and construction businesses, ensuring that back-office operations are as error-free and optimized as possible is crucial, especially with the razor-thin margins in the industry. While those on the job site are hard at work ensuring that services, labor, and materials are delivered up to the client's expectations, those who work inside offices to support projects, especially on the finance side, benefit significantly from technology in optimizing work–ensuring that precious hours are used in high-value activities instead of being consumed by repetitive and easily-automated tasks. 

Accounts receivables, accounts payable, payroll, and general accounting functions are among those where embracing technology makes an immediate impact. Many of those in construction accounting already use spreadsheets to manage accounts and finance.

Construction accounting has complexities that require different approaches where using disjointed spreadsheets can fall short. Additionally, relying on spreadsheets and manual file management opens up businesses to risky errors that lead to poor records, inaccurate data, and poor decision-making.

Another area where technology can save construction businesses from losing profits and time complies with legal requirements. For payments, a fundamental but often unwieldy portion of credit management is ensuring that all projects worked on are protected by lien rights. States have varying requirements to preserve mechanics' lien rights. Staying on top of preliminary notices can be cumbersome, yet overlooking them can cost big. Automating notice tracking and filing through lien management software is a must for contractors, subcontractors, and material suppliers working on multiple projects. 

On The Job Site

One of the most powerful benefits of using software in construction is improved communication. The ability of different construction participants to stay on the same page as far as the progress of the project and the necessary hand-offs and confirmations are simplified and streamlined using tailored software. Even emails can get unwieldy and disjointed quickly and cause "email blindness" that discourages people from checking communication in real-time due to email communication's bulky and lengthy nature. 

Through features that ensure transparency and clear communication that construction software often offers, participants can focus on their project roles instead of digging through mountains of messages and relaying information to multiple point-people. The use of mobile devices amplifies these benefits. Most software in construction can be accessed through tablets and phones, offering businesses a cost-effective way to communicate in real-time.

Drone Technology

To those who have embraced drone technology, the pay-off has been manifold. Drones help construction businesses in many ways, from reduced staffing needs for site surveys and monitoring to using drones in conjunction with AI to monitor the efficiency and productivity of those on the job site. Drone technology also helps contractors map out the construction process even before resources are delivered to the site, so less time is wasted moving resources and people around. Safety is also increased because previously hazardous tasks can be done via drones, such as monitoring high-rise projects. 

Technology pays off

Adopting new technology is a challenge, but it's worthwhile when you know how you're benefiting. Whether you're the decision-maker for new technology investments or putting together a case to get buy-in for new tech, hopefully, this article has helped. 

About The Guest Author:

Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors and material suppliers with lien management and payment compliance. The biggest names in construction use Handle on a daily basis to save time and money while improving efficiency.

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