This Podcast Is Episode Number 0351, And It's About Collaboration - Why It's Essential To Your Construction Company Many elements are vital to a growing construction business. A financially-astute leader is one. A confident and motivated sales team well-versed in your construction company's service line is another. But starting and growing a business requires more than employees with extensive functional skills and appropriate personal characteristics.   Growing a construction business requires collaboration - the deployment of employees in a way that allows them to work together to problem-solve and act with a shared sense of urgency.    When this occurs, group members come to leverage the strengths of one another as they work to achieve shared objectives vital to the construction company's growth. Also, mutual learning takes place, which increases the probability that each employee's performance will evolve from good to better and then best. In turn, a company's performance improves as well.   As collaboration occurs, teams leverage individual differences to produce exceptional outcomes. This knowledge sharing creates a learning enterprise in which construction employees more readily identify solutions to problems. As a consequence, the company may become more operationally and financially successful.  There are many reasons that collaboration has these positive effects. Makes The Best Use Of Available Skills  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. Collaboration allows multiple individuals to participate in the completion of a task at hand, which makes it more likely that the right talent is available at the right time. With collaboration, tasks are completed more efficiently, leaving more time for staff to concentrate on activities that contribute to your construction company growth. Facilitates Problem Solving  Collaboration allows a company to throw the most skilled resources at a problem, which may mean a solution is identified more quickly and more cost-effectively than might be possible otherwise. Leveraging the most appropriate resources means a team's overall functional breadth and depth increase, which can improve the quality of a project's processes and result. Besides, diverse and complementary talent may enhance individual work processes as each employee becomes a part of a greater whole, which can positively affect a construction company's culture. It's the change in culture that contributes to new thinking, which may lead to new ways to perform, which helps the company to grow. Leverages Individual Differences  Asking employees with very different skills to collaborate to accomplish an objective leverages individual knowledge, strengths and capabilities and maximizes organizational potential. 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, which can lead to faster problem scoping and solution formulation, and more effective solutions. Builds Company Knowledge  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. Likewise, as each individual demonstrates a particular skill, other team members may learn these skills, which will be helpful when attempting to accomplish new goals. In effect, team interaction allows team knowledge to build up, like compound interest. In this way, a construction company leverages individual perspectives across the enterprise.  Creates a Learning Enterprise Collaboration provides an opportunity to move beyond learning management systems and content to learning in context, which...

This Podcast Is Episode Number 0350, And It's About How To Find And Keep Top Construction Employees We all know the usual process of finding new employees. Advertise a job,  read resumes, conduct a telephone interview, conduct a face-to-face interview, then choose someone. The steps to recruiting new talent have been the same for decades, leaving many construction business owners to think these are the only way to find new employees.    There are many top-notch employees that you might not find if you don't change your strategy, however, these days there are many new and exciting ways to connect with possible staff and attract qualified employees to your business. All you have to do is be willing to be creative in your thinking.    Get your current employees on it Besides you, who knows better what you need in an employee than your current employees? Not only do they know what you need, but they can also vouch for the people they recommend. Using an employee referral program can save you the costs associated with advertising a position, undergoing extensive interviews, and then training and retraining employees who don't work out.    How does it work? Your employees recommend people for a job with your company, and if their recommendation is successful, they get a reward. This can be a cash bonus, a gift, additional days off work, or the opportunity to work from home for a few days.    Make sure the program's details are precise: does the referred employee have to be hired for the benefit to kick in, or do they have to work at your company for a specific period? Does the gift get more extravagant if they recommend more successful recruits?   Keep the rules simple and make sure all employees know about the program.  Turn to Social Media Social media isn't just a great way to build your customer base; it's also a fantastic way to build interest in working for your company. Employees of all ages—but especially younger generations—use some form of social media to look for work. That could be LinkedIn, but it can also mean Facebook, Twitter, Instagram, or a variety of other sites.   Even if someone who sees your post isn't interested, they may share it with their friends or followers, who will share it with theirs, vastly increasing your reach. Be sure you know who your target candidates are and what social media channels they use and tailor your ads or posts to them.    If you have the time to have a long-view of recruiting, start building your company's employment brand online early by releasing content that highlights your corporate culture. People may see those posts and come to you so you can develop your talent pool. At the very least, you'll already be on their radar when it comes time to hire.  Reach out to past candidates Just because someone wasn't the best candidate for a job in the past doesn't mean they aren't now. There could have been many factors that resulted in that person not being the best fit at that time. Perhaps they've taken courses or developed their experience since you interviewed them.    When you interview people that you like, but they don't quite make the cut, keep their resume on file and consider reaching out to them when a position opens up. You never know when the time will be right for them.   In light of finding the right employee, make sure your company is also a good fit for job-lookers. One way of attracting and keeping top and able crew is creating personal development plans for your employees. Hopefully, you have long - and short-term plans for your company, and you may even have a strategy for your development, but have you considered having a personal development plan (or individual development plan) for employees?   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.  ...

This Podcast Is Episode Number 0349, And It's About Home Maintenance And Repair Service Company Automation And Technology The daily processes and transactions involved in operating a home maintenance and repair service business can mean long hours of repetitive tasks and occasional oversights due to human nature. These days, you can use technology to take care of almost any issue facing your business.    Automating these tasks can result in significant savings in resources and eliminate mistakes caused by human error. The key, however, is to know which tasks should be automated and which ones warrant staff intervention and guidance. Let's take a look at some of them.   Lead Capturing, Nurturing, and Scoring Automating your lead development process can do wonders for your service-based company's conversion rates. Both hot and cold leads require attention and targeted engagement to convert into paying customers. Using automation software can help sales reps to guide prospects to end of the sales cycle strategically, and it can also direct you towards the leads that will convert the fastest. Engaging New Contacts Entrepreneurs like you meet new contacts all the time. Whether it's a potential business partner or prospective client, automating your engagement with them can help you forge a solid rapport after your initial contact. Several CRM options will allow you to group contacts by event, type, company, and location, amongst other settings, to ensure that your business card collections don't go to waste. Personal Direct Mail  Outreach efforts with a personal touch tend to garner higher engagement rates, which explains why businesses send out birthday cards, calendars, seasonal greetings, and other materials to customers. With the right software, you can set up automated, sequenced events to gather customer personal data and incorporate it into specific marketing activities. Hiring Processes Automating your hiring process is one of the best things that you can do for your business. Everything from receiving applications and interviewing to setting up drug tests and completing new-hire paperwork can quickly be done with automation. First, outline what your hiring process looks like. Next, determine staff member roles and duties within your operation. And lastly, establish time frames that each activity should fall within. There are tons of HR software programs that can make automating your hiring process a breeze. Word-of-mouth marketing   Numerous marketing studies show that consumers are more likely to buy from companies if a friend has referred them. Encourage customers to give referrals about your services by simply asking for them. There are several ways to automate this, including adding referral mentions to discount offerings, a website page, and email outreach campaigns. The Benefits Of Technology If you have a task that you don't like to do, there's an app or software program to take care of it for you. It might take a few moments of your time to learn and understand how the software or app works, but doing so will save you valuable time and precious energy. It will also free you up to spend time on the tasks you love to do, not on all the paperwork and record-keeping that go along with running a business.  Here are some programs that we use to make our clients' home maintenance and repair service business easier to manage: Xero Like many construction business owners, you probably didn't dream of owning your own business so that you could manage a paper trail and oversee cash flow. You likely have very little interest in following up on unpaid invoices or spending time paying bills. That's where Xero comes in. Xero takes care of accounting for your small business. You can create and track invoices and purchase orders, manage sales and purchases, and set up scheduled bill payments. You can even reconcile bank transactions any time from a computer, tablet, or smartphone...

This Podcast Is Episode Number 0348, And It's About Construction Business Blueprint For Updating Plans And Setting Goals When you own a small construction business, it's vital you understand how money flows into and out of it. At a basic level, you need to know where your income comes from and what your expenses are. At a deeper level, knowing how money moves through your business can help you make strategic decisions about growth, invoicing, and debt management.    The consequences of not understanding money can be drastic—poor financial management is one of the main reasons businesses fail. That's why you need to understand cash flow.    What is cash flow? [Starting Cash + Cash In - Cash Out] = Cash Flow Before you can start to understand your cash flow, you need to know what cash flow is. Cash flow refers to the movement of money into and out of your business. It's fundamentally understanding how much money is coming into your business (your income, loans, and transfers of personal funds into the company) versus how much is leaving (your expenses, taxes, and loan payments).    How do I conduct a cash flow analysis? An accounting software allows you to conduct a cash flow analysis through the platform itself or possibly via an add on. Open the program, and often a cash flow statement can be found under a "Reports" tab or something similar. So if you're already using accounting software, you can have a cash flow statement with minimal effort.  If you don't use one, you'll have to conduct the analysis manually. Here is a basic cash flow analysis (This can easily be done using a spreadsheet):  First, enter the amount of cash your business had in the bank at the start of a financial period (say a month). Second, add up all the money that came into your business in the month. Include only money that came in, not money owed by clients. Third, add this to the cash from the start of the month (in Step 1). Fourth, add up the cash that went out for the month, including rent, cost of goods, fixed costs, and loan payments. Fifth, subtract the total in Step 4 from the total in Step 3. This gives you your cash at the end of the month, which is also your starting balance for the next month.  If the cash in your account is lower at the start of each month from the previous month, you have a cash flow problem that requires further analysis.  Why is cash flow important? Not making enough money to cover debts is the primary reason small businesses fail. Understanding your cash flow can help you take the steps you need to identify and address issues before they threaten your construction business.  A cash flow analysis can tell you if you're allowing clients too long to pay their invoices, making you financially vulnerable. You can then determine if you need to charge a deposit for your services or shorten the payment terms. It can also tell you if you're spending too much in areas that are not profitable for you. This can help you figure out where you need to cut back on spending—or charge your customers more.  Regular cash flow analysis can also show you what times of the year your construction business drops off. This can help you plan for those times to make sure you have enough money to cover a loss in revenue.  Accounting software to boost cash flow and improve your bottom line If you think accounting software is just for tracking expenses and generating financial reports, you're losing out on an opportunity to improve your bottom line. By taking advantage of insights provided by your software solution, you'll benefit from a more informed approach to marketing and customer service – and by making the most of all the ways your software can improve productivity, you can take meaningful action to increase profits. Here's how: Understand client behavior In addition to storing real-time financial data, your accounting software can also retain important information...

This Podcast Is Episode Number 0344, And It's About How To Achieve Business Success With A Construction Accounting Mentor As the year ends and another page is turning, it is important to learn and listen from trusted people who have come to assist you and guide you in your personal and professional endeavors. Your construction business's financial board, mainly your accountant, is one of them.   Ideally, you and your accountant are more than just an "adviser" and a "client" to each other. With your combined skills, expertise, and a shared mission to support a thriving business, you're more like strategic partners.    The key to achieving success in any partnership is, of course, healthy communication. Before the year ends or at your next meeting, be sure to ask your construction accountant these four important questions:   1. What's my best strategy for increasing revenue? Every construction business owner strives to improve profit margins – but the best way to quickly and sustainably grow revenue will vary from business to business. When reviewing your financials, ask your accountant to pinpoint and suggest smart strategies for driving higher revenue. For your unique construction company, that might mean focusing on new leads, encouraging customers to hire you more frequently, incorporating cross-selling or up-selling, or re-thinking your pricing strategy. 2. How would you assess our financial performance this quarter/year? It's part of your accountant's job to stay current with your company's financial statements and reports (i.e., your balance sheet, income statement, profit and loss statement, and cash flow reports).  Some small business owners – especially those who lack confidence in their financial literacy skills – may only want to know the basics, in simplest terms. Let your accountant know you'd like a more thorough analysis of your finances when you next meet and help in understanding what the numbers mean.  Ask for key ratios, like your gross profit percentage, and an assessment of the big picture, drawing comparisons with past performance as well as trends in your industry Also, ask for any insights your accountant might have into the reasons for new or surprising developments, and what you can do to correct areas where your business is falling short – as well as what actions you can take to continue any positive trends. 3. How can you help me grow my construction business? Your accountant should be prepared to offer professional advice to help your business expand and grow over time. Scaling a business can be tricky as it requires a company to do everything it must to keep their customers happy while adapting to change – such as new staff and new systems to accommodate a higher volume of clients.  Financial systems may need to change as your business expands; likewise, your company's financial management may need additional support as you transition to a larger company. Ask your accountant how you can best work together to facilitate smooth, sustainable growth with minimal disruption to operations, and for tips on how to successfully scale based on experience with other small business clients. 4. What are your most successful clients doing? Chances are your accountant serves as a trusted advisor to several clients – and therefore, will be privy to the inner workings of companies who are struggling and others who are thriving. Neglecting to ask your accountant about their clients' success stories is a missed learning opportunity. Even if a business has little in common with yours – operating in a different industry, or as a seller of products versus services – there's value in learning what yielded impressive results for another company. Alternately, you might ask your accountant how their clients overcame challenges similar to yours to help you brainstorm possible solutions. The opportunity to learn from not just an accountant but your Construction...

This Podcast Is Episode Number 0346, And It's About Common Bookkeeping Pitfalls And The Value Of Outsourced Accounting Although most construction company owners recognize the importance of careful financial management, few want to spend their time dealing with numbers. Unfortunately, not keeping a close eye on your income and expenses can be very costly for a business.   Here are five of the most common bookkeeping pitfalls, and some simple tips for getting back on track. 1. Mixing business and personal All too often, contractors adapt a "buy now, sort later" approach to expenses, using the same credit card for personal and professional purchases. At the end of the month, they're left poring over statements, trying to sort things out. Mixing business and personal expenses cost extra hours of bookkeeping each month and muddles your overall financial picture. Avoid this pitfall by using a separate credit card and bank account for business, and being disciplined about separating expenditures. 2. Neglecting to track reimbursable expenses Receipt-tracking is a necessary part of business ownership. You need to keep track of receipts to understand spending patterns and effectively manage your company's finances. And if you want to claim deductions at tax time, you'll need to submit receipts along with your tax return.  But far too many business owners take a haphazard approach to collecting and organizing receipts—especially while on-the-go, where a whopping 50% of their expenses are generated. Get the deductions you deserve and simplify tax prep by using an expense-tracking app. We have a directory of additional resources of apps and software for contractors that can record mileage, billable hours, and other expenditures, as well as generate expense reports. Plus, many of these apps sync seamlessly with your business bank account and accounting software. 3. Not taking advantage of technology Are you still relying on manual accounting methods? While basic spreadsheet tools can get the job done, they leave the door wide open for human error. Mortgage loan giant, Fannie Mae, once uncovered a $1.1 billion error on their Excel spreadsheet, citing "honest mistake" as the cause. What's more, manual methods can't match the technological benefits offered by software like QuickBooks or Xero. These systems track invoicing, link with your credit card and business account, organize expenses, and generate insightful financial reports. 4. Not keeping accounts up to date Let's be frank. Most construction business owners don't look forward to that weekly appointment with "the books." Many entrepreneurs cite bookkeeping as their most dreaded responsibility and will find a host of reasons to avoid it. 5. Doing it all yourself It is entirely understandable for budget-conscious entrepreneurs to try to cut costs by handling bookkeeping on their own. However, taking advantage of professional help—even on a part-time basis—can generate substantial savings of time and money over the long term. "Outsource your weaknesses." So says start-up guru, Sujan Patel, when advising small business owners to get outside help for tasks like payroll and bookkeeping. And when you consider that 70% of businesses fail due to poor in-house financial management, Patel's advice seems spot on. Unfortunately, many small business owners seek to keep costs low by doing everything themselves— unwittingly sabotaging the financial stability of their own company. If numbers aren't your strength and you would instead focus on building your business, it's time to hire a bookkeeper.  Here are four ways to ensure that you find the right fit. Choose a bookkeeper with experience in your industry. The nuances of bookkeeping vary from one corner of the market to another. When assessing candidates, it's important to look not only at total years of experience but also at the relevance of that experience. As an example, your business...

This Podcast Is Episode Number 0345, And It's About Construction Business Blueprint For Updating Plans And Setting Goals As another year winds down, it's a good time to reflect on your recent construction business successes – and consider what you'd like to achieve in the coming twelve to fifteen months. One tiny change in your process can help you grow your Construction Company.   Entrepreneurs are typically highly creative and optimistic; as a result, they often have difficulty narrowing down their ideas from among all the exciting possibilities, whether it's an opportunity to expand to a new market or choosing a better time management strategy.    Set priorities As you update your business plan, focus on what's most important for your construction business to achieve this coming year. Then break your goals down into smaller tasks, maximize productivity, and enjoy the little successes that lead to significant changes. (More on this below) Keep in mind Randal's Contractor Success M.A.P. (Marketing-Accounting-Production) to help you stay on track and provide you with solid direction to reach your target. Think different Your priorities in the coming year may be to hit a specific revenue target, launch a new service/subscription, or tap an entirely new market. An important thing to keep in mind as you make plans to move your construction business forward is how you'll stay competitive. For instance, it's essential to review your pricing strategy on an annual basis, to ensure you continue to attract new prospects and retain clients. As part of your overall business planning process, spend some time on competitive intelligence, too. Include in your plans how you'll increase value for your offerings and continue to stand apart from the crowd. Review your bookkeeping reports and consider the insights of your accountant moving forward. Find money If scaling your service-based business is on your agenda for the year ahead, and you don't have savings earmarked to fund your ideas, you'll want to make sure your business plan includes adequate financial planning. Applying to a lender for a business loan is one option. In this case, you'll want to include up to date cash flow reports, income statements, budgets, and projections in your plan for a potential lender. If your construction business doesn't have a credit history, you may need to look at other options for financing your plans. Using a business credit card regularly and paying off the balance can help you build a good credit rating, which will help you prepare to apply for a loan down the road. Again, your accountant can help provide additional financial advice and support as you update your business plan, based on your most current financial records.  While some of you love planning, others feel overwhelmed by the process. How do you decide on just a handful of goals that take priority, with so many moving parts that make up a construction business? Set SMART Goals Focus your efforts and increase your chances of achieving your goals by the SMART guideline: Specific, Measurable, Achievable (Attainable), Realistic, and Time-Bound. Start by defining your top three business goals for the next four quarters. With those in mind, do some research to help you decide on the best way to achieve those three goals – and a reasonable timeline for meeting specific targets.  Redefine your brand Is the elevator pitch you used a year ago – even six months ago – still accurate? Unless you are crystal clear on who you are as a construction company, whom you're here to serve, and what you hope to achieve in the next one to three years, it's going to be hard to come up with meaningful goals. Take a look at your company vision, mission statement, and core values. If they need tweaking to reflect where your construction business is today and where you want it to go, start there. Then you can move on to setting some useful long and short term...

This Podcast Is Episode Number 0344, And It Will Be About Quotes Vs. Estimates And Insights To Contract Negotiations   The nature of some types of businesses makes it challenging to come up with a standard price list. For tradespeople and construction company owners like you, what's required in terms of time, skill, labor, and materials frequently vary from job to job. Offering an estimate or quote provides potential clients with a customized figure for what they can expect to pay based on what will be required to complete a specific project. Quotes A quote is a legally binding fixed price a company prepares for a client; as such, they should always be in writing. A quote should summarize the work to be performed and include a detailed breakdown of all the costs and the final total, including taxes.  Once a business offers a quote and a client signs off on it, the price cannot change even if the job ends up costing more than initially anticipated. For this reason, it's crucial to always quote as accurately as possible, allowing ample time to complete the job and carefully pricing out costs for materials and labor (e.g., subcontractors).  To protect your business from "scope creep," a quote should also stipulate that additional charges for extra work beyond what the original quote covers will apply. Estimates Unlike a quote, an estimate isn't legally binding, and it isn't a guarantee of what the actual work will cost. Still, it's recommended that estimates also be provided in writing. An estimate is offered as a ballpark figure, based on the information available about a project at that moment in time. As such, it's understood that the estimate is subject to an increase or decrease once the work begins.  Construction companies should take just as much care when providing an estimate as they would when drafting a quote. Ideally, an estimate should provide a number within roughly 20 percent of the final price. It's good practice for businesses to provide more than one estimate, to offer a range of options at different price points. Tips For Costing Out Jobs For small construction businesses, it's vital to appear as professional as your larger competitors whenever you communicate with clients, but especially when negotiating the details of a potential project.  Be sure when you're preparing your quote or estimate that you include the following information: Your business number  Business contact info (phone, email, address) A detailed summary of the work to be performed A breakdown of costs (subcontractors, materials, time and hourly cost for labor) The total cost A timeline for the work and completion date Contract terms, including deposit and payment schedule Another essential bit of information is to provide your clients when the quote or estimate expires. Many companies choose an expiry date of 30 days, to protect themselves from the possibility of rising costs for materials or other factors that may influence the cost of the job. Insights To Contract Negotiation There are several aspects of the construction business that can only be learned through experience. One of them is negotiating contracts.  Several people fear the negotiation process 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 are going to be your business partners in one capacity or another. Let's take a look at some things you need to remember when you're in the process of...

This Podcast Is Episode Number 0343, And It Will Be About Efficient Business Systems And The Value Of Documenting Your Processes   Too many construction businesses fall over because the owner has not established efficient business 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 symptoms are familiar, and their results disastrous: Poor or non-existent record-keeping.  Tax obligations are not met.  Invoices go out late, and debts remain uncollected.  There is one cashflow crisis after another.  Goods and services are incorrectly costed and priced. Any of these factors can lead the business down the slippery path to failure, but all are avoidable. The whole point about putting in sound systems is that they free you to spend more time working ON your business, not in it. Be Business-like To be in business and to remain in business, become a business person! To run a business, you must be business-like. It's not sufficient to be very good at what you do. Lots of people who are 'very good at what they do' have failed. The familiar cry: "I'm far too busy for that" is also no excuse. Are you 'too busy' to be a competent businessperson? If so, your business won't last long. You must continue to develop your business skills. To be a businessperson, you have to make an effort to become something of an 'all-rounder', not just a specialist player. You can offer outstanding services, but if you don't develop superb business systems, then you are not a fully rounded businessperson, and your business will be in danger of failing. Remember that other stakeholders in your business, such as the building material suppliers who give you credit and the bankers who extend loans and financing terms, are always assessing your business skills. If you consistently pay people late or can't meet the terms of your debt agreements, they will draw the obvious conclusions about your business skills. How Good Business Systems Will Help You An exceptional business system will make your construction company stronger, more efficient, and easier to run. It will also make your business far more attractive to future buyers because if you have developed clear operating and procedure manuals, the company will be seen as an independently viable unit and less dependent on you.  Think, for instance, of what makes franchises so successful: it's because they are designed so that people can buy a proven system and operate it after minimal training. They can do this because the business procedures are captured in simple, clear operating manuals.  Here are some ways to implement excellent business housekeeping: 1. Good record-keeping and bookkeeping - will help you keep on-side with the Internal Revenue Service department. If you're able to meet your tax obligations through sensible planning, you'll sleep better at night. You won't fear a tax audit, and you'll know how your business is doing. A 'sudden tax demand won't catch you out of the blue' because no such thing exists for a well-run construction business. You should always know which taxes are due and when. You'll suffer less stress. 2. Proper business planning - will help you set goals for your business, with specific steps on how to achieve these goals. Without goals, where do you think you're going? Running a business without goals is like turning up at an airport and saying, "I'd like to go somewhere." The person at the ticket desk would think you're clueless! 3. Positive cash flow forecasting - will enable you to anticipate a possible cashflow problem (something all growing businesses experience from time to time) and take steps before the problem becomes a crisis. Banks will respect you if you anticipate...

This Podcast Is Episode Number 0442, And It Will Be About Understanding Construction Accounting Terms And Why It Matters Hiring an accountant is widely considered best practice for small business owners. But delegating financial analysis and reporting doesn't mean thoroughly checking out of the process each month or quarter. On the contrary, it's recommended that business owners work closely with their accountants throughout the year to better understand their financial position and make smart plans for future growth. We have discussed time and again the importance of knowing the difference between Construction Accounting and Regular Accounting. For the sake of our new readers, blog subscribers, and podcast listeners, I'll be providing you with some basic accounting knowledge so you can have more informed, insightful discussions with your financial advisors before the year ends. 1. Cash Flow  Do you have more cash flowing into your business each month than you payout to cover costs and expenses? If so, your accountant will conclude that you're "cash flow positive." If the opposite is true, your cash flow statement will reveal that you're "cash flow negative."  Having excess cash on hand means you're better equipped to keep up with debt, cover unforeseen expenses, and invest in growth opportunities. Your accountant can generate a cash flow statement each quarter to keep tabs on this key performance indicator. 2. Profit and Loss Statement  The profit and loss statement (also known as the income statement) is one of the most important documents used by accountants to determine the profitability of your business. The P&L statement lists revenues and gains as well as expenses and losses over a specific period (typically every three months for small construction businesses). It calculates your all-important "bottom line," so you know if you're operating at a loss or turning a profit. 3. Gross vs. Net Profit Gross profit is what remains when you subtract the cost of goods sold (COGS) from your total revenue. Net profit, on the other hand, drills deeper. It reveals your exact dollar per profit of sales after subtracting all operating expenses, including COGS, taxes, and interest paid on debt, among others. Gross and net profit are both profitability ratios. They are key for measuring business performance against an industry benchmark and your competitors. 4. Balance Sheet The balance sheet offers a snapshot of your overall financial position at a particular moment in time. It lists the assets (such as cash, inventory, accounts receivable, and equipment); liabilities (like accounts payable, income tax, and employee salaries); and shareholder capital. In a nutshell, the balance sheet shows what you own, as well as what you owe. 5. Accounts Receivable & Accounts Payable Simply put, accounts receivable is money customers owe your business for goods or services sold. It is considered an asset on your balance sheet. Conversely, accounts payable is money you owe suppliers and any bills you have yet to pay, so it's listed as a liability on your balance sheet. Perhaps you're wondering if you're doing everything you can to boost revenue and cut costs? Or if your business is more profitable this year than it was last? The best way to answer these questions is with a thorough assessment of profitability. That's where gross and net profit calculations come in. These are two of the most critical metrics for measuring your capacity to generate earnings relative to costs and expenses.  Let's take a look at the differences between gross and net profit, and what they can reveal about the financial health of your business. Gross Profit: A General Overview Of Profitability You can calculate your company's gross profit by subtracting the cost of the goods or services you sell from your total revenue over a specific period. The equation looks like this: Sales - cost of goods sold = gross profit When...