Podcast
Contractor Success Map with Randal DeHart | Contractor Bookkeeping And Accounting Services
Hosted by Randal DeHart | Construction Accountant |PMP | QPA · EN
Back office support can make or break your contracting company. Let us move your contractor bookkeeping service off the roller coaster of pain onto the merry go round of peace of mind with our U.S.A. based outsourced contractors bookkeeping services and contractor success M.A.P.
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605: The Power Of Accurate Job Costing In Your Construction Business
Dec 6, 202400:10:45Tap to summarizeThis 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: Define your jobs clearly and use unique identifiers for tracking. Document all materials and person-hours involved, calculating total costs accurately. 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
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597: Key Questions To Help Evaluate And Operate Your Construction Business
Oct 11, 2024Tap to summarizeThis Podcast Is Episode 597, And It's About Key Questions To Help Evaluate And Operate Your Construction Business External factors, such as economic changes or technological advances, can significantly impact whether a business will thrive or fail. The rise of sharing and gig economy apps is an excellent example. These apps gave consumers more affordable options for daily tasks and errands and provided individuals with a new way to earn money on their schedules. Running a business is a fascinating journey. But it's essential to thoroughly evaluate your company before moving further to ensure you're creating a sustainable and successful venture. Costs may be high, requiring careful planning. You may need to educate your customers and convince them to adapt to your business before they're ready to use it or hire you. And let's remember the competition that already exists in the market. Competitor research is critical to evaluating your company when it's just starting out. Knowing your competitors, their operations, and their strengths and weaknesses will help you create a successful strategy. To start with, through phone conversations or in-person chat, I usually tell our clients to consider these top five questions: 1. What are my short-term and long-term business goals? 2. How well do I understand my target market and customer needs? 3. What sets my construction company apart from competitors? 4. Am I effectively managing my financial resources and cash flow? 5. Do I have a clear marketing and branding strategy in place? If you know the answers, the questions will not bother you. - Randalism In school, when you sat for an exam or a test, and you knew the material forwards and backward, it was fast and easy. The exams and tests for the classes you struggled with were the opposite. Having a Business Process Management Plan answers the questions about how to run your business because it is something you developed. Not something someone else did and handed to you. As you build and grow your construction business, you must constantly evaluate and reflect on your progress. By investing a little effort now, you can save money, time, and heartache. Asking yourself the right questions can help you navigate challenges, make informed decisions, and set strategic goals for the future. Here are some key questions to consider as you learn more about your construction business: 1. Financial Performance: How is the overall financial health of the business? Are there any significant fluctuations in revenue or expenses? What is the profitability of different projects or contracts? It's important to know what resources, including financial capital, you need to start and maintain your company. It's also important to know what barriers exist. These barriers include high startup costs, tough competitors, or regulatory hurdles that may need to be overcome. 2. Operational Efficiency: Are projects being completed on time and within budget? What is the status of current projects in terms of milestones and deadlines? Are there any recurring operational challenges or bottlenecks? Consider what systems and tools you can implement to streamline operations and improve efficiency. 3. Customer Satisfaction: How satisfied are your clients with the quality of work and customer service? Are there any common feedback or complaints from clients? What steps are being taken to address customer concerns and improve satisfaction? Evaluate how you can foster strong relationships with clients, suppliers, and subcontractors by understanding the current market and trends and being an active listener. 4. Employee Engagement and Development: How engaged are my employees in their work? What opportunities are available for professional development and growth? Are there any notable retention or recruitment challenges? Not everyone is an expert at everything. You have to ask yourself whether you have the right skills to launch and run the business or who you can gather around you to support you. 5. Compliance and Risk Management: Am I up to date with relevant industry regulations and standards? What measures are in place to mitigate potential risks in projects? Are there any outstanding legal or compliance issues that need attention? How do I prioritize safety and compliance in my construction projects? Not every project is guaranteed success. There are always inherent risks involved in starting a new venture. Evaluating these risks and creating contingency plans to address them is an integral part of the evaluation process, especially ensuring that your company complies with regulations and industry standards. Of course, measure and track the results of your journey and improvements. I do not intend to deter you with this post; my goal is to encourage you to think about what you must do to turn your company into a successful business and fill in the spots you may have missed. Balancing various responsibilities within a limited timeframe can be challenging, and time equals money. You might be better off focusing on your skills, but hiring help under your payroll is unnecessary. You can, however, outsource tasks like: 1. Administrative Responsibilities such as bookkeeping, invoicing, and paperwork can be overwhelming for solo business owners also focused on project management and client communication. 2. Financial Management Many solo construction business owners require assistance with financial tasks such as budgeting, accounting, and tax preparation to ensure compliance and economic stability. 3. Time Management Assistance with time management strategies and tools can significantly benefit solo business owners like you. 4. Legal and Compliance Matters Understanding and adhering to complex legal and compliance requirements, including permits, licenses, and safety regulations, often requires external support to avoid potential pitfalls. 5. Marketing and Business Development Generating leads, marketing services, and expanding the business can be daunting for construction business owners who may need guidance on effective marketing strategies and business growth opportunities. 6. Professional Development Staying updated with industry trends, new technologies, and best practices often requires external resources and support, especially for solo contractors juggling multiple roles. Final thoughts Building a successful business is not a sprint; it's a marathon. By regularly reflecting on these questions and seeking answers, you can gain valuable insights into your industry, identify areas for improvement, and make well-informed decisions to drive sustainable growth. Continuous learning and self-assessment are not just tools but the cornerstones of building a successful construction business. Stay committed, stay motivated, and keep learning. 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
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0391: Telltale Signs Of Bookkeeping Embezzlement And How To Prevent It
Oct 30, 2020Tap to summarizeThis Podcast Is Episode Number 0391, And It's About Telltale Signs Of Bookkeeping Embezzlement And How To Prevent It Bookkeeping embezzlement stems from a feeling of entitlement and the need to get even. Your bookkeeper or accountant will steal if they feel confident they can get away with it and if circumstances allow for it due to weak integrity and a sense of "Redistributing The Wealth, But Not The Work Or The Responsibility." It is estimated that the number of bookkeepers caught embezzling from contractors is less than one percent of the total. In most cases, the ones that are caught are rarely convicted because all too often, it is the contractor who has to spend thousands of dollars on forensic accountants and attorneys to prove the theft occurred. In most cases, it is near impossible to persuade the authorities to prosecute when a contractor bookkeeper embezzles because it is often viewed as a "Victimless Crime." In most cases, an in-house construction bookkeeper starts with good intentions, and over time they become complacent and jealous of the lifestyle they see the contractor enjoying. Unfortunately, they rarely experience life in construction outside the climate-controlled, clean office with good lighting, real restrooms, beverages, and a relatively quiet environment. It makes perfect sense for you to delegate all the mind-numbing bookkeeping services tasks as you can. Contractors who want someone to provide Contractor Bookkeeping Services and pay the bills are practically waving a Red Flag and holding a sign that says, I'm stupid, pay my bills and embezzle as much of my money as you want! When Do Most People Buy A Burglar Alarm? After Being Robbed, Not Before! Whenever you think it is a good idea to give your in-house bookkeeper or any Outsourced Contractor Bookkeeping Service full unrestricted access on your online bank account, savings account, payroll account, or credit card so they can save you time by paying your bills - take two aspirin and lay down for a nap, when you wake up and still feel it is a good idea, think again and review these telltale signs: Your bookkeeper... - asks for signature authority on your checking/savings/payroll accounts - has a lifestyle that seems above what they are earning - takes Records Home to work on, or they want to work in the office when no one is around (Fraudulent activities are easier when nobody is around) - refuses to take a vacation - has access to your credit/debit cards - receives mail-order packages at work - tries to explain delinquencies tax notices - misplaces payroll receipts, deposit records, supplier letters, and estimates - has QuickBooks in a complete mess, and you cannot understand any of it - is the primary contact for your company's banks, auditors, creditors, etc. (gets angry when you ask for a QuickBooks report) - tries to blame the previous bookkeeper or outside accounting firm for messy QuickBooks - gets defensive when you or your CPA asks questions - makes the bank deposits, and they seem to be too small - does not get along well with other employees and staff members. - suggests they could save money by getting rid of the outside accounting firm There are more warning signs, but it's more important to be aware of the actions you can take: You (the owner) signs all checks - Nobody else ever signs any checks. It is okay if your bookkeeper prints the checks; just make sure the owner signs them. Three separate checking accounts - One for your main operating funds, one for payroll with just over enough to clear all outstanding payroll checks, and one for the owner's debit card purchases. You input the PIN - For all payroll or payroll tax deposits. Letting your bookkeeper be responsible for payroll or payroll tax deposits is like giving them keys to the kingdom and saying, "Take whatever you want." No company credit cards - Let employees be reimbursed for company expenses. Every employee needs time off - Any employee that does not want to take a holiday or a vacation may appear loyal, but there could be another reason. It is wise to check each employee's work when he/she is gone. Make bank deposits every day - Rain or shine busy or not. Photocopy and scan all checks and bank deposit slips and upload them to your paperless server. QuickBooks backup copy every day - QuickBooks has a built-in feature that will do it automatically, and there are several other services you can use as well. Never let the bookkeeper take a backup copy of your QuickBooks out of the office for any reason. Doing so will make it easier for them to embezzle and harder for you to claim your innocence. Petty Cash - If you have a cash drawer, balance it every day the same way as 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 keep large amounts of money from disappearing. Keep blank checks in a safe - Most office supply stores sell small safes for under $150.00, and it is money well spent. All it does is slow down and deter the lousy bookkeeper. Bank and credit card statements - Need to be mailed to a post office box or the construction company owner's home and opened by them. Never let the bookkeeper open any bank and credit card statements. Verify - All check numbers, including voided ones. Check references before you hire - And search for convictions (not charges). Review Your Key Performance Indicators (KPI) - Every day as an internal-control check and watch for unexplained balance changes. Don't hesitate to call the police - If you suspect your bookkeeper is stealing. Waiting can only make it more difficult for the officers, and they may get the idea you are okay with it, which could make it harder to prosecute the offender. Never let anyone take work home - You could get in trouble for not paying overtime, and there are too many opportunities for copying your company files, customer or client lists, and selling them with your competition. (I understand that this is challenging with the current state we live in, it's important to take extra precaution. If most of the actions are followed and you are comfortable with this kind of set up, then it's all up to you in the end). Final thoughts Contractors with bookkeepers paying their company bills are begging to be embezzled. Protect yourself, your family, and your company. There is much work here, but it could save you thousands if not hundreds of thousands of dollars. One of the best ways to limit your bookkeeper embezzlement exposure is to outsource your bookkeeping services to us because we handle all construction bookkeeping services chores, and we never touch your money. About The Author: Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com
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