By Randal DeHart | Construction Accountant |PMP | QPA
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Implications for Construction Accounting and Bookkeeping:
Lessons Learned and Better Practices:
1. Data security is paramount
The cyber outage underscores the critical importance of robust data security measures. Construction companies must prioritize the security of their financial data, including sensitive client information, to prevent unauthorized access and mitigate the risk of data breaches.
2. Backup and recovery plans
Construction firms should review and enhance their data backup and recovery plans. Regular, automated backups of financial records and bookkeeping data can help ensure that critical information is not lost during a cyber incident.
3. Vigilance in Vendor Management
Construction companies rely on external vendors and software providers for bookkeeping tools and platforms. To minimize the risk of potential disruptions due to cyber incidents, construction firms must assess their vendors' security protocols and resilience.
4. Employee training and awareness
Educating employees about cybersecurity best practices and potential threats is imperative. Construction businesses should invest in training programs to enhance employee awareness and establish protocols for identifying and responding to potential cyber threats.
5. Contingency planning
Comprehensive contingency plans for potential cyber outages are essential. Construction companies should establish clear protocols for maintaining critical financial operations during a disruption, ensuring minimal impact on day-to-day business activities.
A quick recap of actionable steps:
FEA Cybersecurity
As an accounting firm, our client's privacy and security remain our top priorities. We continually look at ways to develop and evaluate our system to prevent breaches and network holes. We utilize Secure Socket Layer encryption, which ensures that all data passed between the web server and browsers remains private and integral. There are two levels of restrictions, and a password must be entered before you can access 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. 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. 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.
Don't assume your construction business is safe from hackers because you run a small business or don't collect payment information. There is a lot of private information available that hackers and thieves can use to make money, and companies large and small are targets. Be aware of vulnerabilities in your system and take steps to address them before it's too late.
Online data protection is critical in providing contractors with reliable and professional-grade bookkeeping services. The cost of proper bookkeeping combined with secured cyber information is priceless. Clean, up-to-date bookkeeping records, accurate financial reports, and protected data make up for a good night's sleep. After all, security comes from setting up Structures and Systems in place so your construction company will run smoothly.
Conclusion:
The recent cyber outage serves as a wake-up call for construction contractors to prioritize cybersecurity in their accounting and bookkeeping practices. By implementing robust defenses and best practices, you can protect your business from cyber threats and ensure the integrity of your financial operations.
Stay vigilant and build a more solid security for your construction business. By addressing these key lessons, construction companies can better safeguard their financial data and minimize the impact of potential cyber incidents on their operations.
As a reminder:
Speaking of technology, have you made the switch yet?
QuickBooks plans to stop selling several versions to new U.S. subscribers. The deadline to purchase new subscriptions to the listed products has been extended from July 31, 2024, to Sept. 30, 2024.
We do our best to inform you of your options based on your construction company's needs and ensure you are alerted to fundamental software changes that may affect your construction business now or in the future. Although extended, we recommend checking and upgrading immediately to avoid service disruptions and workflow interruptions. Please plan accordingly or reach out if you need help.
We are here to help you achieve your definition of success, whether you would like to outsource your bookkeeping to us, buy and use our templates, or learn to do it independently.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
When your construction bookkeeping is set up right
It gives you insights into your income and expenses, such as:
Bookkeeping also helps keep track of all your business transactions. A good system will serve as an audit trail showing every transaction that has taken place within your company. This includes purchases from suppliers, sales made to customers, and bills paid out by suppliers or employees (like salaries).
This information will quickly become apparent if there are any irregularities, such as missing items on purchase orders. You get transparency into your business, a way to ensure you remain compliant with laws, and valuable insights to help you make smarter decisions.
While factors such as market trends, technological advancements, and customer demands undoubtedly play a significant role in shaping your business, financial insights are an often underestimated aspect that can substantially impact growth. Understanding the intricacies of your company's financial data and leveraging this insight effectively can be a powerful tool for driving growth in your construction business.
When to hire a construction bookkeeper
There are many scenarios where hiring a bookkeeper makes sense. These depend on your construction business setup and your abilities.
You should consider hiring a bookkeeper if you have
What a Construction Bookkeeper can provide for you
1. Expertise
Construction bookkeepers are experts at managing, sorting, and recording your business's financial transactions. They've spent time developing their skills and experience. During that time, they've also seen and resolved bookkeeping-related issues that you may come up against. Their expertise makes them more efficient at managing those issues.
Beyond that, they understand business trends and challenges others in your industry face and can help you move through those. They also know what questions to ask to help you make important decisions and can share best practices with you.
2. Guidance
Your bookkeeper not only helps you maintain accurate records but also understands your financial circumstances. They help you assess how to make critical business decisions, such as whether now is an excellent time to grow or when you should hold back. They can also identify trends in your industry and help you take advantage of those opportunities.
Finally, they can assist you with budgeting and sticking to your budget. They'll help you develop a realistic financial plan that enables your business to grow while achieving short- and long-term goals.
3. Time savings
As a business owner, you likely have many activities to focus on. In bookkeeping alone, there are numerous tasks to be responsible for, such as:
Bookkeepers take on those tasks, so you don't have to. It's not just about the energy you put into them; it's about the fact that unless you're a construction bookkeeping expert, it'll likely take you longer to complete these activities than a bookkeeper. That can add up to a lot of extra hours.
Hiring a Construction Bookkeeper frees up valuable time for other activities such as marketing, perfecting your products and services, or spending time with family.
4. Money savings
There's a time cost to doing your books, but there's also a potential money cost in the form of missed opportunities. The time you spend doing your books is time you could be out creating or taking advantage of new opportunities for your business. Your bookkeeper frees you up, giving you the time and energy to identify potential opportunities. They can also advise whether you're in an excellent financial position to jump on those possibilities.
Additionally, the expertise bookkeepers bring to their activities means they're likely to prevent costly mistakes that could affect your finances.
Final thoughts
Prioritizing better bookkeeping practices is fundamental to driving growth and sustainability in your construction business. By proactively managing your company's finances, you can gain a competitive edge, mitigate risks, and position your business for long-term success in the dynamic construction industry.
Remember, the success of your construction business depends not only on the quality of your work but also on the strength of your financial foundation. Embracing better bookkeeping practices can pave the way for sustained growth and profitability in your construction enterprise.
As a reminder:
QuickBooks plans to stop selling several versions to new U.S. subscribers. The deadline to purchase new subscriptions to the listed products has been extended from July 31, 2024, to Sept. 30, 2024.
We do our best to inform you of your options based on your construction company's needs and ensure you are alerted to fundamental software changes that may affect your construction business now or in the future. Although extended, we recommend checking and upgrading immediately to avoid service disruptions and workflow interruptions. Please plan accordingly or reach out if you need help.
We are here to help you achieve your definition of success, whether you would like to outsource your bookkeeping to us, buy and use our templates, or learn to do it independently.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
Why contingency planning is crucial
Contingency planning involves foreseeing potential risks and developing a strategic approach to mitigate their impact. For small business owners, this means safeguarding their assets, ensuring business continuity, and protecting their staff and customers.
A well-thought-out plan can differentiate between a temporary disruption and a permanent shutdown. It helps contractors mitigate risks and minimize the impact of unexpected events on their projects.
Here are a few reasons why having a contingency plan is essential for construction contractors:
1. Risk Management: A contingency plan enables contractors to identify potential risks and develop strategies to address them. By proactively planning for various scenarios, contractors can better protect their projects from cost overruns and delays.
2. Budget Protection: Unforeseen events can quickly eat into a project's budget. A contingency plan allows contractors to set aside funds specifically for addressing unexpected expenses, ensuring that the project stays on track financially.
3. Schedule Flexibility: Delays are not uncommon in the construction industry. A contingency plan allows contractors to adapt to unexpected schedule changes without derailing the project timeline.
4. Client Confidence: Clients appreciate contractors prepared for the unexpected. Demonstrating that you have a contingency plan can instill confidence in your clients and reassure them that you can manage unforeseen challenges.
5. Competitive Advantage: Navigating unexpected obstacles efficiently sets contractors apart in a competitive industry. A well-executed contingency plan can demonstrate a contractor's professionalism and commitment to delivering results, giving them a competitive edge in the market.
Emerging issues and regulation changes
Ever-evolving regulations demand greater transparency and accountability from small businesses. This is particularly relevant in preventing and addressing financial fraud, which remains a substantial risk. The increased scrutiny from regulatory bodies means companies must have robust monitoring systems and response strategies. Failure to comply not only puts your financial standing in jeopardy but also your business's reputation.
Practical steps to develop your contingency plan
Risk assessment: Identify all potential risks that could impact your business. This includes everything from natural disasters and cyber-attacks to key personnel suddenly becoming unavailable. Rank these risks based on their likelihood and potential impact.
Document everything: Put together an operational guide for your business, outlining everything you would need to know to keep it running, such as who your suppliers are, how and when they are paid, and everything else that happens on a daily/weekly/monthly basis. As part of the same process, outline the roles and responsibilities of every senior staff member and scope out the daily and weekly tasks so a replacement could easily assume those responsibilities.
Communication plan: Develop a communication plan to keep employees informed during and after a crisis. Consider using multiple channels such as email, phone calls, and social media to reach out to employees and customers.
Develop response strategies: For each identified risk, develop a response strategy. This could involve establishing a crisis management team, setting up temporary operational sites, or creating data backup protocols. Ensure these strategies are detailed and cover all critical aspects of your business operations.
Regular review and testing: A contingency plan is only effective if it's current and functional. Review and update your plan regularly, especially after significant changes in your business environment. Conduct drills and simulations to test your team's readiness and the effectiveness of your response strategies. Your contingency plan should be a living document that evolves with your business.
Construction Client's Story (edited for brevity):
On Sunday, July 27, 2008, around 6:30 p.m., my girlfriend and I had just returned from an overnight hiking trip.
When we arrived home, we discovered that we had been robbed. We immediately called 911.
As we walked through the house, we discovered that our computer and many other valuables were gone. The computer had all the company business on it.
QuickBooks, invoices, all the subcontractors' info, and everything to keep the company books. We were at a loss for what to do. But as luck would have it, we had Randal DeHart as our accountant. He had all our info on a backup system somewhere on a huge server.
So we called Randal to let him know that we would get a new computer as soon as the insurance company paid us.
Randal called us the next day, July 28, 2008, and told us to come to his office. To our surprise, he had gone to Office Depot, purchased a new computer, loaded it with QuickBooks, and restored all our business information.
We are so appreciative that Randal had our backs. We had told him that we would pay him for the computer as soon as possible, but you know what he said,
No thanks are necessary; if we just pay forward, that's all he asked."
How's that for a Good Accountant?
Also, as a reminder that could be helpful in your planning:
QuickBooks plans to stop selling several versions to new U.S. subscribers. The deadline to purchase new subscriptions to the listed products has been extended from July 31, 2024, to Sept. 30, 2024.
We do our best to inform you of your options based on your construction company's needs and ensure you are alerted to fundamental software changes that may affect your construction business now or in the future. Although extended, we recommend checking and upgrading immediately to avoid service disruptions and workflow interruptions. Please plan accordingly or reach out if you need help.
Final thoughts
As a business owner, a lot of critical information exists only in your head. As the founder, you always know what's happening and how to do things, but what would happen if you weren't there?
Developing a contingency plan is not just good practice; it's a critical component of your business strategy. By taking proactive steps today, you can secure the future of your small business.
Plus, having a plan gives you peace of mind that everything could continue in your absence or without crucial team members. It also makes for a better-run and more organized business. Forcing yourself to have everything documented centrally builds a greater awareness of roles and responsibilities across the organization while making holidays less challenging!
We could be a part of your contingency plan; let me know how I could help with yours.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
Moreover, Building Information Modeling (BIM) technology has transformed how construction teams work together. BIM fosters better communication and collaboration by providing a centralized platform for sharing 3D models and project data, ultimately leading to more efficient decision-making and problem-solving.
Another astounding technological advancement that has significantly boosted workplace productivity is the integration of wearables and IoT (Internet of Things) devices. These innovations enable real-time tracking of equipment, materials, and the workforce, leading to optimized resource allocation and enhanced safety measures on-site.
Would you like to implement better practices while staying on budget? These are some of the most effective methods of managing a productive, happy workplace while increasing output:
Embrace Technology
While many construction workplaces still see new technology, as mentioned above, as unnecessary or even distracting, the simple truth is that it can significantly impact productivity. Updated hardware, software, and machinery ensure that work can be performed quickly and with minimal error. While it may not seem like a big deal, even minor issues, such as temporary connectivity problems or hardware breakdowns, can quickly add up throughout a fiscal year.
Start small, like incorporating better project management software and bookkeeping processes. If this overwhelms you, let me know how I can help.
Avoid Excessive Micromanagement
There is no denying that management is crucial, but too much of a good thing can adversely affect productivity. Instead of encouraging employees to put forth their best efforts, it results in an eventual dependence on micromanagement that can sink productivity levels.
Excessive micromanagement can be detrimental to productivity and morale in a construction workplace. To avoid this, it's essential to focus on
Recognize Success
Just as employees must be held accountable for their actions, they should also be recognized for their success. Even small efforts, such as verbal recognition or occasional awards, can encourage employees and make them feel like their hard work is being rewarded. For businesses that can afford it, more significant rewards, such as holiday parties, improve morale and create camaraderie in the office, leading to happier, more productive employees.
Break Out of Ruts
While assigning tasks based on an employee's particular competencies is generally advisable, remember that doing the same tasks repeatedly over an extended period can make even a skilled employee feel as if their work has become monotonous. Exposing employees to other tasks and even different departments may be helpful. This renews motivation, offers new skills to learn and apply, and gives employees a broader understanding of the company's operations.
Cut Down on Meetings
Often, meetings serve as nothing more than temporary breaks from productive work. A meeting needs a specific purpose, an organized agenda, and a plan of action to maintain productivity. Meetings can be a great way to share ideas and establish goals, but keep them from getting in the way of delivering actual results.
In conclusion
Technology has vastly improved construction communication and workplace productivity. By leveraging user-friendly mobile applications and software, construction teams can communicate seamlessly, collaborate effectively, and ultimately achieve higher levels of productivity and efficiency.
Balancing a construction business's needs is never easy, but focusing on increased productivity can positively impact nearly every other facet of the workplace. The above-mentioned techniques eliminate unnecessary pitfalls and ensure employees are personally invested in efficient, quality work output.
As a reminder:
Speaking of technology, have you made the switch yet?
QuickBooks plans to stop selling several versions to new U.S. subscribers. The deadline to purchase new subscriptions to the listed products has been extended from July 31, 2024, to Sept. 30, 2024.
We do our best to inform you of your options based on your construction company's needs and ensure you are alerted to fundamental software changes that may affect your construction business now or in the future. Although extended, we recommend checking and upgrading immediately to avoid service disruptions and workflow interruptions. Please plan accordingly or reach out if you need help.
We are here to help you achieve your definition of success, whether you would like to outsource your bookkeeping to us, buy and use our templates, or learn to do it independently.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
The symptoms are familiar, and their results are disastrous:
Any of these factors can lead the construction business down the slippery path to failure, but all are avoidable. The whole point of implementing sound systems is that they free you to spend more time working on your business, not in it.
Sound business systems will strengthen, improve, and simplify your business. They will also make your construction business far more attractive to future buyers. If you have developed clear operating and procedure manuals, your business will be seen as an independently viable unit and less dependent on you.
Here are five steps to a better construction business:
One key area where efficient business systems can make a difference is project management. For instance, using project management software that allows for effective scheduling, budgeting, and resource allocation can improve project delivery, increase productivity, and enhance client satisfaction. By having a clear overview of project timelines, milestones, and resource availability, construction firms can better manage their projects and ensure that they are completed on time and within budget.
Moreover, integrating technology into construction business processes can save substantial time and cost. Leveraging advanced estimating and bidding software streamlines the bidding process and allows for more accurate cost projections, leading to more competitive bids and improved profit margins. Additionally, embracing cloud-based accounting and financial management systems can simplify invoicing, expense tracking, and financial reporting, providing better visibility into the economic health of the business.
Another area where efficient business systems can yield substantial payoffs is communication and collaboration. Implementing collaborative digital platforms and tools can enhance communication among project teams, subcontractors, and clients, leading to better coordination, reduced errors, and smoother project workflows. By fostering transparent and efficient communication, construction businesses can minimize costly misunderstandings and delays, ultimately improving project outcomes.
In conclusion
Implementing efficient construction business systems can generate significant payoffs for construction firms. In business, you don't have to be an expert at everything. For example, you might hate bookkeeping. Okay—but do get someone else to do it for you; don't rely on a shoebox for your accounts! You should at least understand the processes and the overall accounting picture, even if you don't want to do the 'drudge work' yourself.
Poor systems lead to stress and burnout. On the other hand, good business systems enable you to work smarter, not harder. They free you to work on your business rather than in it. That way, you're more likely to avoid burnout, and you'll be able to take time off work because you can train others to follow your clearly documented systems and procedures.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
1. Precise Cost Forecasting and Budgeting
Financial modeling empowers construction companies to predict costs accurately, considering many factors such as material costs, labor expenses, equipment outlays, and overheads. Companies can develop precise project budgets by creating detailed financial models, spot potential cost overruns, and implement strategies to monitor expenses. This foresight allows for proactive cost management, preventing financial surprises that could impact project profitability.
Start by creating a base financial model incorporating your current financial data. Input variables such as projected sales, estimated expenses, and planned investments allow you to forecast your financial performance across different scenarios. By simulating best-case, worst-case, and most-likely scenarios, you'll be better prepared to navigate potential challenges and seize opportunities.
Action Tip: Develop your initial model using spreadsheet software or financial modeling tools. Regularly update it as new data becomes available.
2. Streamlined Cash Flow Management
Effective cash flow management is crucial in construction, where substantial capital outlays are often needed before revenues are realized. Financial modeling enables companies to map out cash flows over the project's lifecycle, identifying potential bottlenecks and ensuring adequate liquidity is maintained to support ongoing operations. By optimizing cash flow through meticulous financial modeling, construction companies can enhance their financial stability and seize growth opportunities.
Presenting a detailed financial model can significantly enhance your credibility with lenders and investors. It demonstrates your understanding of your business's financial position and showcases your preparation for future growth.
Action Tip: When seeking financing, ensure your model includes comprehensive projections showing how the funds will be used and the expected return on investment.
3. Informed Decision-Making through Scenario Analysis
Financial modeling allows construction companies to conduct scenario analysis, assessing the potential impact of various factors on project outcomes. Whether it's changes in material costs, fluctuations in interest rates, or delays in project timelines, scenario analysis helps companies evaluate the financial implications of different situations and develop contingency plans to mitigate risks. This proactive approach to risk management is invaluable in an industry where unforeseen challenges can have significant financial repercussions.
Financial models serve as robust decision-support tools. They help you evaluate the economic implications of various choices, whether setting pricing strategies, launching new projects, or considering investment opportunities.
Action Tip: Before making substantial business decisions, use your financial model to conduct a cost-benefit analysis. This will help you weigh the pros and cons and align decisions with your financial goals.
4. Assessing Project Feasibility and Profitability
By incorporating revenue projections, cost estimates, and financing structures into their financial models, companies can gauge the financial viability of potential projects and make informed decisions about resource allocation. This thorough assessment of project feasibility helps companies refrain from investing in financially unviable ventures and focus on opportunities with the most significant potential for success.
It's crucial to create detailed and comprehensive financial projections. This includes estimating costs for materials, labor, equipment, and permits and factoring in potential risks and market fluctuations. Additionally, conducting sensitivity analysis and scenario planning can help assess the project's financial resilience to various external factors. Utilizing industry-specific Key Performance Indicators (KPIs) and benchmarks can provide valuable insights into the project's economic viability.
Action Tip: Set up regular financial reviews—monthly or quarterly—to compare projected versus actual performance. Use these reviews to refine your model and strategies continually.
5. Setting and Achieving Goals and Monitoring Performances
Defining specific financial goals for the construction business, such as increasing revenue, improving profitability, or managing cash flow effectively, is essential. These goals should be realistic, measurable, and aligned with the business strategy.
It involves a detailed representation of the construction company's economic situation, including income, expenses, assets, and liabilities. This model is a valuable tool for analyzing different scenarios, identifying potential risks, and evaluating the impact of strategic decisions on the company's finances.
Establish clear, achievable financial goals based on your model's insights. By tracking your progress against these goals, you can focus strategically on growth and profitability while identifying improvement areas. Regularly comparing your actual financial performance with your model's projections is essential. This practice helps identify deviations, assess their causes, and make the necessary adjustments to keep your business on track.
Action Tip: Break down long-term goals into smaller, manageable milestones. Regularly review and adjust these goals based on your actual performance and market conditions.
Strategic Financial Planning and Risk Mitigation
Financial modeling is the cornerstone of strategic financial planning for construction companies, providing a roadmap for long-term financial management and risk mitigation. By creating comprehensive financial models, companies can pinpoint potential financial vulnerabilities, develop risk mitigation strategies, and make informed decisions that align with their long-term financial objectives. This proactive approach to financial planning is essential for navigating the industry's inherent complexities and uncertainties.
Construction businesses can make more accurate cost projections and optimize their financial resources by incorporating various factors such as material costs, labor expenses, and overheads (LMOS™) into the financial model.
Once the financial model is in place, it's essential to regularly review and update it to reflect changes in the business environment, market conditions, or project parameters. This ensures that the construction business stays on track toward achieving its financial goals and can adapt to evolving circumstances.
In conclusion
The potential of financial modeling in the construction industry is immense. By harnessing financial modeling tools and techniques, construction companies can gain invaluable insights into their financial landscape, make informed decisions, and proactively manage financial risks. Ultimately, the ability to develop accurate and insightful financial models is a crucial differentiator for construction companies looking to achieve financial resilience, profitability, and sustainable growth in a friendly, competitive, and dynamic industry.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
The power of effective bookkeeping using QuickBooks Desktop - plus an Important Update from Intuit.
Keeping track of sales, earnings, expenses, and purchases is fundamental to your construction business's overall health and sustainability. Effective bookkeeping produces the data you need to evaluate your current practices, anticipate challenges, and set attainable future goals.
Many business owners dread bookkeeping and accounting tasks despite their proven importance. In fact, 40% of surveyed entrepreneurs claim that bookkeeping is one of the worst parts of running a business!
Is it worth the aggravation?
Here are three reminders of how effective bookkeeping is the cornerstone of small business success:
Keeping track of reimbursable expenses
A reliable system for tracking reimbursable expenses ensures you reap all the benefits you're entitled to when filing your taxes. Expenditures sorted into categories, such as "food," "travel," and "office supplies," can be cataloged quite simply with online bookkeeping software.
Using a dedicated credit card for business expenses and updating your records every month will put money back in your pocket come tax time.
Measuring profitability and planning for the future
To grow your business, you must be able to track and compare its finances from one year to the next.
In addition to reconciling the books and bank statements every month, effective bookkeeping generates records you can use to gain a comprehensive overview of your business. This data can help you:
Preparing for tax season
Few things are more stressful for business owners than scrambling to prepare poorly maintained financial records for tax season. In addition to the panic of last-minute filing, inaccurate or incomplete documentation can lead to severe penalties, fines, and an audit.
In the United States alone, 40% of small businesses pay an average penalty of $845 per year for late or incorrect filings!
Sound bookkeeping can save you money and give you peace of mind. You'll be assured of compliance with regulations and receive a reliable estimate of amounts owing long before your tax bill is due.
If you've been following us over the years, you know that we are raving fans of Intuit, the makers of QuickBooks, and have used QuickBooks since the first version was released in 1992. In fact, in 2005, we moved our entire client base, including our own accounting firm's QuickBooks files, to an Intuit-approved commercial hosting environment so we could offer our clients all of the benefits of the full desktop version of QuickBooks accessible online 24/7, and it has been a huge success!
We've always encouraged our contractor clients to use QuickBooks Desktop as QuickBooks Online does not offer the full features of QuickBooks. We know that QB Desktop in the Cloud is one area where you can reduce your overhead and increase productivity quickly and easily.
It is a powerful tool that can streamline your accounting processes and provide valuable insights into your company's financial health. Here are some reasons why using QuickBooks Desktop is crucial for your construction business:
1. Industry-Specific Features: QB Desktop offers industry-specific features tailored to the needs of construction businesses. You can track job costs, create estimates, and manage progress invoicing, which is essential for staying on top of your projects' financial aspects.
2. Robust Reporting: QB Desktop provides robust reporting capabilities, allowing you to generate customized reports to analyze your business's performance. You can track profitability by project, compare actual costs to estimated costs, and monitor cash flow to make informed financial decisions.
3. Integration with Third-Party Applications: QBDesktop integrates with various third-party applications commonly used in the construction industry, such as project management software and time-tracking tools. This integration can help you streamline your workflows and eliminate the need for manual data entry.
4. Job Costing: Job costing is a critical aspect of construction accounting, and QB Desktop offers comprehensive job costing features. You can allocate expenses to specific projects, track labor costs, and monitor overhead expenses to ensure that each project remains profitable.
5. Compliance and Security: QB Desktop is designed to help you maintain compliance with industry regulations and ensure the security of your financial data. You can set user permissions to control access to sensitive information and generate audit trails to track changes made to your financial records.
Using QuickBooks Desktop for your construction business can significantly improve your financial management processes and give you the tools to make informed business decisions. However, change is inevitable, and as someone with responsibilities, I have little time to waste; I have learned that sometimes I have to deliver challenging news. (In case you missed our Tuesday email):
For those using QuickBooks Desktop 2021 software, it will be discontinued after May 31, 2024. (You may have received this notice from Intuit through your email). This includes all 2021 versions of QuickBooks Desktop Pro, QuickBooks Desktop Premier, QuickBooks Desktop for Mac, and QuickBooks Enterprise Solutions v21. Other Intuit products are affected by the software discontinuation.
If you don't upgrade your QuickBooks Desktop 2021 by May 31, 2024, you won't have access to live technical support if you run into problems or any other Intuit services that can be integrated with QB Desktop. This includes QB Desktop Payroll, QB Desktop Payments, and online bank feeds. Discontinued versions won't receive the latest critical security patches and updates. (More info from Intuit)
Final tip: This is the time to ask for help
There's a good reason why most small businesses outsource at least one accounting function to help manage tasks like payroll, closing the books each month, and managing accounts receivable. With all the changes coming to QuickBooks software, it would be best and all the more reason to ask for support.
Most entrepreneurs are passionate about developing new business ideas – not crunching numbers. Employing or outsourcing a professional construction bookkeeper, even part-time or as-needed, can help optimize your accounting and increase profitability. It's well worth it. Invest in effective bookkeeping and build a solid foundation for a resilient, forward-moving construction business.
Feel free to contact me if you need specific guidance on using QuickBooks Desktop for your construction bookkeeping and accounting needs. And, of course, subscribe to our newsletter so you won't miss out on important industry news, events, and updates.
PS
We offer free resources to help you save time and money that you can download and print now.About The Author:
Sharie DeHart, QPA, co-founded 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. She 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 [email protected]
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