0065: Contractors Success Map Why Your Construction Company Needs Bookkeeping

This podcast is episode number 00065 and it will be about Why Your Construction Company Needs Bookkeeping

When you own a small contracting company, like a residential remodeler, plumber, electrician, concrete contractor, flooring contractor or any other construction related company it is imperative that you have a good clean set of books that are consistent and updated regularly.

The Tax Collector Will Not Be Happy With Financial Reports Generated From A Whole Bunch Of Random Transactions Put Into QuickBooks At The End Of The Year

Tax preparation, Quarterly Tax Returns, Payroll Tax Returns, Sales Tax Returns are the primary reason contractors need to maintain a detailed set of books, but there are other factors at play. It’s important to know how much money your contracting company is bringing in and how and where the money is going.

It is important to compare your results to industry standards to determine where you need to improve your contracting company business model. There is a lot of information to be gained when you compare this year’s Profit & Loss to the prior year because it will alert you to trends early enough to respond rather than reacting after it is too late and help establish profit and sales goals.

In the late 1800's bankers, lenders and credit agencies began working toward a common language to develop a set of standards for financial statements formatting that would allow everyone in the world of finance to compare apples to apples.

In 1914 RMA was founded to facilitate the exchange of credit information, it was named the Robert Morris Club, after Philadelphian Robert Morris, who signed the Declaration of Independence and was the primary financier of the Revolutionary War. - See more at: http://www.rmahq.org/about-rma/a-brief-history-of-rma#sthash.kVUlI1BP.dpuf

Since 1973, the Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities.

This means all legitimate banks; lenders and bonding companies have access to massive data bases which can make judgments about your Construction Company but only if you present the Profit & Loss Reports and Balance Sheet Reports in a format they can use.

If you provide financial statements in any other format they are likely to smile, nod approvingly, shake your hand and politely send you out the door with a balloon of hope.

Current and accurate financial statements presented in the formats bankers, lenders and bonding companies want can save you a lot of money on loans and lines of credit when you need to borrow money. Lenders want to loan money to contractors who they believe can and will pay the loan back. There is a direct relationship between how much interest you will be charged for loans and lines of credit and how well your financial statements match the format they want to see.

Contractors who try to save money with simple spreadsheets are only fooling themselves and telegraphing to their bankers and lenders they are non-conformists "Mavericks", "Cowboys", "Renegades", "Rebels" and that is one of the main reasons they never get loans and lines of credit. Bankers and lenders are the exact opposite and they don't take chances.

Bankers and lenders want to see consistency, so use a construction accounting software like QuickBooks, Dexter+Chaney, Maxwell, ComputerEase or something similar. For small construction company owners doing less than $5,000,000 in sales every year QuickBooks is your best option. Make sure all of your financial reports conform to the standards your banker, lender and bonding agent expects and you will save yourself a lot of money and grief.

For construction accountants like us it is a "no brainer" that every successful and highly profitable construction company owner follows these rules. Unfortunately, every struggling construction company has one thing in common, they truly believe bookkeeping is an overhead and therefore a cost to be reduced and if all possible eliminated.

According to a June 2012 article published by AccountingToday.com there are more than 30 million small businesses in the US, 74 percent do NOT employ full-time or part-time accounting help. That includes many contractors who are attempting to figure out how to do the books or hand it off to their wives to do it without the necessary background, taking away valuable time from running their contracting company.

When you started your contracting company going at it alone may have seemed the right way to go because you felt you were saving you money. But, if you aren’t skilled in Construction Accounting you could end up in a lot more trouble than it is worth. And then you could find yourself paying some construction accountant the same money to clean up QuickBooks as you would have spent to have them do it right the first time. In addition you would have enjoyed the support and mentoring of a construction accountant along the way which could have helped you save more money in taxes as well as guide you to which jobs are most profitable; the 80/20 rule for construction success.

Bookkeeping tasks like posting payroll properly, tracking credit card usage and reconciling accounts can be tricky for any business using regular accounting. However, for contractors who need Job Costing that just doubles or triples the data entry and what is worse most bookkeepers non trained in Construction Accounting don't have a clue and just put transactions in wrong and nobody knows it until the contractors wants to know how much money they made on a particular job.

I've seen thousands of messed up QuickBooks for Contractor files over the years where someone had tossed data into QuickBooks without knowing the key elements of the bookkeeping process and they created some disastrous results. In most cases, those results adversely affected the construction company's tax returns. Not only that, but a subsequent IRS audit may result in additional tax liabilities as well as open up other years for examination since the IRS now has the ability to request a copy of your QuickBooks file.

Experts will tell you to seek out professional help in all areas of your business in which you are not competent Four Options For Your Contractor Bookkeeping Services

1. Do-It-Yourself
2. Put your spouse to work for low or no pay and risk divorce
3. Hire an in-house bookkeeper and hope you don't get a bad bookkeeper
4. Outsource it to a bookkeeping service that understands construction

It is understandable why contractors like option #1 and #2 because it appears to be cheaper and it is in the short-run, but without construction accounting expertise they spend valuable time trying to figure out tasks and end up in desperate need of a human being for guidance.

After trying option #1, #2 and #3, please consider trying option #4. Many qualified bookkeeping services don’t charge as much as a CPA but can deliver exactly what you need. The trick is to be sure the person or agency you engage understands construction and construction accounting at a deep level. You may want to have your tax professional or a qualified CPA refer you to someone who can help you or review their preliminary work to determine if they are handling your books accurately and completely.

Our Contractor Bookkeeping Services System Is A System

For Construction Company Owners who do not need the full power of QuickBooks for contractors and want 24/7 online access we offer Xero Accounting Online and we have custom setup for construction companies. Click Here For More.

This is one more example of how Fast Easy Accounting is helping construction company owners just like you put more money in the bank to operate and grow your construction company. Construction accounting is not rocket science; it is a lot harder than that and a lot more valuable to construction contractors like you so stop missing out and call Sharie 206-361-3950 or email sharie@fasteasyaccounting.com

Thinking About Outsourcing Your Contractors Bookkeeping Services?

Click On The Link Below:

www.FastEasyAccounting.com/hs

Need Help Now?

Call Sharie 206-361-3950

sharie@fasteasyaccounting.com