This Podcast Is Episode 636, And It's About The Three Pillars Of A Profitable Construction Business

Running a small construction business is no small feat. You're on job sites one minute, sending invoices the next, and trying to line up your next project after that. It's a constant juggling act—and without the right systems, it's easy to fall behind or burn out.

As construction bookkeeping specialists, we work with small contractors who are incredibly skilled in their trade but often feel overwhelmed when it comes to running their businesses. And over the years, we've noticed a pattern: the most profitable, low-stress companies all focus on the same three areas:

1. Getting the Right Jobs (Marketing)

2. Managing the Money (Accounting)

3. Delivering Profitably (Production)

 

Let's break down how each of these pillars supports a stronger business—and how you can tighten them up, starting today.

Pillar 1: Marketing – Attracting the Right Jobs

Marketing isn't just about having a nice logo or handing out flyers; it's about creating a lasting impression. For construction businesses, effective marketing means attracting the kind of clients and projects that align with your skills, values, and profit goals.

The Mistake: Chasing Every Lead

Many small contractors try to say yes to every inquiry, especially when work is slow. But not all jobs are created equal. Some clients haggle, delay payments, or expect champagne results on a beer budget. Taking those jobs to stay busy can ultimately cost you money.

The Fix: Focused, Consistent Outreach

Start by defining:

• Your ideal client (residential vs commercial, budget level, style)
• Your best services (bathroom remodels, decks, renovations, etc.)
• Your service area (so you don't waste time driving)

Then, build a system around that. A few simple but effective ideas:

• Post before/after photos on social media
• Ask every happy client for a review or referral
• Keep your Google Business Profile updated
• Reply to inquiries promptly with a professional estimate

Believe it or not, even your invoice can be a marketing tool. Clean, well-structured paperwork signals professionalism and builds trust, making clients more likely to refer you.

Pillar 2: Accounting – Controlling the Money

This is the part where most contractors feel out of their depth—but it's arguably the most important. If you don't know your numbers, it's almost impossible to price accurately, manage cash flow, or plan for growth.

The Mistake: Guessing at Prices and Profits

Many small construction business owners rely on their gut instinct to price jobs or determine if they're making a profit. But guessing leads to underbidding, unpaid labor, or worse—projects that cost you money to finish.

The Fix: Job Costing + Cash Flow Awareness

At a minimum, you should know:

• How much does each job cost (LMOS™)
• How much do you need to earn per day/week to stay profitable
• What your cash flow looks like over the next 30–60 days

This is where we provide the most assistance to contractors. With a sound bookkeeping system in place (like QuickBooks set up for construction), you can:

• Track expenses by project
• Compare estimated vs. actual costs
• See real-time profit/loss reports
• Prepare for taxes before tax season hits

You'll be shocked how much easier it is to raise your rates (or say no to low-ball jobs) when the numbers back you up.

Pillar 3: Production – Delivering Projects Profitably

You're likely already focused on the work itself. But being great at building isn't enough—you also need to finish jobs on time, avoid scope creep, and manage subs and materials efficiently.

The Mistake: Letting Projects Drift

If you're not tracking timelines, labor hours, or change orders, even a small project can run away from you. That eats into your profit and frustrates clients who were expecting more transparent communication.

The Fix: Simple Project Controls

You don't need fancy software to keep projects on track. A few simple steps go a long way:

• Break the job into clear phases (and invoice accordingly)
• Use a whiteboard or app to track material orders and deliveries
• Document change orders and get them signed before moving forward
• Track hours worked (yours and your crew) against the budget

From a bookkeeping perspective, this is a gold mine. Suppose you log labor and material costs against each job. In that case, you'll build a library of real-world data that makes your future estimates sharper and your scheduling more realistic.

Your M.A.P. - How the 3 Pillars Work Together

Here's the magic: these three areas aren't separate—they support each other.

• Marketing brings in better jobs.

When you know your numbers, you can market confidently and say "no" to bad fits.

• Accounting keeps your pricing and cash flow in check.

When you price reasonably, you can afford to deliver great work without cutting corners.

• Production builds your reputation and efficiency.

When you finish jobs on time and budget, clients rave—and your marketing takes care of itself.

It's a flywheel: each pillar makes the others stronger.

Final Thoughts

You don't need to be a large company to run a professional and profitable construction business. You need to build a foundation around these three pillars:

1. Market to the right clients
2. Know your numbers
3. Deliver on your promises

And you don't have to do it alone. As construction bookkeeping specialists, we help small contractors like you establish the systems that reduce stress, protect profits, and set you up for long-term success.

Ready to Strengthen Your Foundation?

Let's talk. We'll help you:

• Set up job costing that works
• Understand your cash flow and overhead
• Clean up your invoicing and reporting
• Build confidence in your numbers—so you can grow with clarity

You can book a free 30-minute consultation today, and let's get your business running on all three pillars.

This Podcast Is Episode 635, And It's About The #1 Reason Contractors Lose Clients: Poor Invoicing—And How to Fix It

As we celebrate Independence Day and the spirit of hard work and craftsmanship that built our country, it’s the perfect time to think about strengthening your construction business, so you have the freedom to grow and succeed.

When most contractors consider why they lose clients, they often blame price competition, slow projects, or a client’s unrealistic expectations. But in my experience as a construction bookkeeper, one of the most common—and preventable—reasons contractors lose business is poor invoicing practices.

I know what you might be thinking: “My craftsmanship speaks for itself; invoicing is just paperwork.” But the truth is that invoices are often the last impression you leave on a client. That impression determines whether you get paid promptly, earn a good review, or ever hear from them again.

Here’s why poor invoicing costs you clients, how it damages your reputation, and exactly what you can do to fix it starting today.

The Hidden Charges of Poor Invoicing

Let’s unpack what “poor invoicing” looks like in the real world:

• Surprise Charges – Adding unexpected line items without explanation leads clients to feel blindsided. Even small uncommunicated costs, like a few extra hours of labor or a disposal fee, can make clients doubt your honesty.
• Late or Sporadic Invoices – Sending invoices weeks (or worse, months) after work is completed sends the message that you’re disorganized. It also forces clients to scramble their budgets, and they may start ignoring your emails altogether.
• Disorganized or Confusing Layouts – Handwritten invoices, crumpled paper, or Word documents with inconsistent formatting look unprofessional. They make it difficult for clients to understand what they owe and why, opening the door to disputes.
• Lack of Payment Terms – If your invoice doesn’t clearly state when payment is due, clients may assume there’s no urgency. This leads to late payments, awkward reminders, and unnecessary tension.
• No Proof of Work Completed – Many clients want to see proof that matches what they agreed to pay for, such as photos of progress, signed change orders, or milestones met. Without these, they might question the final bill.
• Errors and Omissions – Mistakes in calculations, missing line items, or billing for the wrong amount can destroy trust in an instant.

These issues might seem small when you’re juggling multiple jobs. Still, they add up quickly and can easily cost you a client’s future business or a valuable referral.

Why Invoicing is a Marketing Tool, NOT Just a Bill

Invoices are more than payment requests—they’re a key part of your client experience. Every interaction you have with a client, from the first estimate to the final invoice, contributes to your reputation.

Consider this: clients rarely see the hours you put in behind the scenes or the challenges you overcome to finish their project. They do see your invoices, emails, and paperwork. If your administrative side feels sloppy, clients may assume your craftsmanship is, too, even if your work is top-notch.

On the other hand, precise, prompt, professional invoices can:

• Build trust and reinforce your professionalism
• Encourage faster payments, boosting cash flow
• Make clients more likely to refer you
• Lead to glowing online reviews
• Differentiate yourself from less organized competitors

When you treat invoicing as a core part of your marketing—rather than an afterthought—you send a powerful message: you respect your client’s time, budget, and peace of mind.

How to Fix Poor Invoicing Practices

Here are six practical steps you can take immediately to transform your invoicing process—and your client relationships:

1. Use Construction-Specific Invoicing Tools

Skip generic templates or handwritten invoices. Invest in software designed for contractors, such as QuickBooks for Contractors or Buildertrend. These tools let you:

• Create detailed, professional invoices
• Break down labor, materials, and other costs
• Track payments and overdue invoices
• Sync estimates with final invoices for seamless transitions

They’re designed to handle the complexities of construction work, including progress billing and change orders.

Excel works well, too, and we have free downloadable templates here.

2. Invoice Promptly and Consistently

Send invoices immediately upon completing milestones or projects. Make it a routine part of your workflow—ideally within 24 hours of finishing a phase of work. Regular, timely invoicing demonstrates to clients that you’re organized and serious about your business.

Pro tip: Automate invoice scheduling if your software supports it. You can set up progress invoices that are sent automatically at agreed-upon milestones.

3. Break Down the Work Clearly

Your invoices should include line items that detail labor hours, materials, subcontractors, and any additional charges. Provide quantities, unit prices, and short descriptions. A transparent invoice gives clients confidence that they’re paying for precisely what they approved.

For example, instead of:

Labor: $5,000

Break it down as:

• Framing labor (40 hours @ $50/hour): $2,000
• Drywall installation labor (30 hours @ $50/hour): $1,500
• Finish carpentry labor (30 hours @ $50/hour): $1,500

This clarity prevents misunderstandings and reduces disputes.

4. Include Payment Terms

Always include clear payment terms on your invoice, such as:

• Payment Due: Net 15 (15 days after invoice date)
• Late Fee: 1.5% per month on overdue balances

Ensure that your client has agreed to these terms upfront (in your contract or proposal). Stating them clearly on the invoice eliminates confusion and provides you with a legal basis if payments are delayed.

5. Add Professional Branding

Your invoice should include your company logo, consistent fonts, and professional formatting. This isn’t just about looking fancy—it reminds clients they’re working with a legitimate, established business.

Include your contact information, contractor license number, and website to make it easy for clients to reach you with questions or share your info with referrals.

6. Follow Up Politely but Firmly

Don’t let overdue invoices linger for weeks without action. Set reminders to follow up a few days before the due date and again shortly after if payment has not been received.

Your follow-up doesn’t have to be aggressive—keep it friendly but firm. For example:

Subject: Friendly Reminder: Invoice #2024-015 Due Tomorrow

Hi [Client Name],

Just a quick reminder that Invoice #2024-015 for your [Project Name] is due tomorrow. Please let me know if you have any questions!

Thanks so much,

[Your Name]

Automated reminders in invoicing software can save you time and ensure consistency in your billing process.

The Bottom Line: Better Invoicing Builds Your Reputation

Ultimately, precise, prompt, and professional invoicing is one of the simplest and most effective ways to market your construction business. Clients who trust your paperwork are far more likely to trust your work and recommend you to others.

Plus, you’ll benefit from:

• Improved cash flow
• Fewer disputes
• Better client relationships
• A stronger reputation for professionalism

Next Steps: Let's Fix It Together

Suppose you’re ready to stop losing clients to poor invoicing and start winning more referrals. In that case, it can help you set up a professional, efficient invoicing system tailored to your construction business. As a construction bookkeeping specialist, I know how to streamline your paperwork, allowing you to focus on what you do best: building.

Wishing you a safe and joyful Fourth of July! May your holiday be filled with family, friends, and a renewed commitment to growing your business.

Contact us today for a complimentary consultation, and let’s transform your invoicing into one of your most valuable marketing assets. 

This Podcast Is Episode 634, And It's About Financial Red Flags Your Construction Company Can't Afford To Ignore As a construction bookkeeper, I've had a unique vantage point, watching countless projects unfold from the first bid to the final payment. While the hammers and blueprints are the visible signs of progress, it's the numbers behind the scenes that truly tell the story of a company's health. And let me tell you, those numbers often whisper warnings before they start screaming.   Small business owners in the construction industry are incredibly busy. You're juggling bids, managing crews, dealing with permits, and ensuring client satisfaction. It's easy for subtle financial warning signs – what I call "red flags" – to get overlooked until they become critical problems. However, ignoring these signals can lead to severe cash flow issues, stalled growth, and even business failure.  

Based on what I've observed, here are five common financial red flags that you absolutely cannot afford to ignore, along with practical steps you can take to address them.

Red Flag #1: Constant Cash Flow Crises Despite "Profitable" Projects

This is the most puzzling red flag for many owners. You look at your profit and loss statement, and it shows a healthy profit. Yet, your bank account is always running on fumes. You're constantly chasing payments, delaying supplier invoices, or juggling funds to make payroll.

Why it's a problem: Profit is a theoretical measure of what you've earned over a period; cash flow is the actual money moving in and out of your business. In construction, where you often incur significant costs upfront (materials, labor for the first phase) and payments come in installments (often with retainage held back), it's entirely possible to be profitable on paper but cash-poor in reality. This constant stress impacts your ability to take on new projects, negotiate better deals, and even pay your team on time, leading to low morale.

How to fix it:

• Implement Robust Progress Billing: Don't wait until a project is 50% or 100% complete. Structure your contracts to allow for regular progress payments tied to specific milestones (e.g., foundation poured, framing complete, rough-ins finished). This ensures a steady stream of cash.
• Aggressive Accounts Receivable (A/R) Management: Send invoices promptly as soon as milestones are met. Have a polite but firm follow-up process for overdue invoices. Don't be afraid to make phone calls.
• Negotiate Favorable Payment Terms with Suppliers and Subcontractors: While you want to pay your bills on time, try to secure longer payment terms (e.g., Net 30 or Net 45) from your vendors whenever possible. This helps you collect from your clients before your payments are due.
• Manage Retainage Proactively: Thoroughly understand the retainage clauses in your contract. Track how much retainage is outstanding for each project and aggressively pursue its release as soon as the contractual conditions are met. This money is yours; get it!
• Build a Cash Reserve: Even a small percentage of profit set aside each month into a dedicated savings account can create a vital buffer for lean times. Aim for 3-6 months of operating expenses.

Red Flag #2: Consistently Inaccurate Project Estimates (Leading to Underbidding)

Do you frequently find projects ending up significantly over budget, eating into your expected profit margins, or even becoming a loss? Do you often need to inform clients about additional costs? This points directly to issues with your initial estimating process.

Why it's a problem: Inaccurate estimates mean you're consistently underbidding, leaving money on the table, or worse, taking on jobs that will inevitably lose you money. This directly impacts your profitability and, by extension, your cash flow, as you're funding the gap with either the cash from other projects or your capital. It also damages client trust when costs unexpectedly balloon.

How to fix it:

• Implement Detailed Job Costing: This is a non-negotiable requirement. For every project, meticulously track all expenses, including labor hours (with specific tasks), material quantities and costs, subcontractor invoices, equipment rentals, permit fees, and miscellaneous expenses.
• Learn from Past Projects: Conduct a post-mortem analysis after each project. Compare your actual costs to your estimated costs. Where were the discrepancies? Was it materials? Labor hours? Unexpected site conditions? Use these insights to refine your estimating formulas.
• Categorize and Standardize: Develop a comprehensive system of cost codes for materials, labor types, and activities to ensure accurate and consistent tracking of costs. This consistency makes it easier to track and compare data across projects.
• Build in Contingency: Always include a contingency fund (typically 5-15% of the total project cost) in your estimates for unforeseen issues, changes in material prices, or minor scope creep.
• Use Estimating Software: Even simple estimating software can help streamline the process, ensure all line items are considered, and integrate with your accounting system.

Red Flag #3: Uncontrolled Material Waste & Loss

Are materials constantly going missing or getting damaged on site, or are you consistently buying more than what was initially estimated? This is a direct drain on your project's profitability and your company's cash.

Why it's a problem: Every piece of wasted or lost material is money directly out of your pocket. It means you're paying more than you bid, leading to cost overruns. It can also cause project delays while you wait for replacements.

How to fix it:

• • Implement Strict Inventory Control:
  • Secure Storage. Designate secure, organized storage areas on job sites for materials when not in use or overnight.
  • Material Tracking System: For larger projects, consider a simple log or spreadsheet to track materials received and used.
  • Regular Site Cleanliness: A clean, organized job site naturally leads to less waste and makes it easier to spot missing items.
• Careful Material Handling: Train your crew on proper handling and storage techniques for various materials to minimize damage and ensure optimal safety.
• Accurate Take-offs: Ensure your initial material take-offs (the process of determining the quantities of materials needed) are precise to avoid over-ordering or multiple trips to the supplier.
• Return Unused Materials: Establish a process for returning unused, undamaged materials to suppliers for credit, where possible.

Red Flag #4: Inefficient Labor Utilization & Unaccounted Time

Labor is often the most significant cost for a construction company. Suppose your crews are standing around, waiting for materials, traveling excessively between job sites without proper tracking, or simply not as productive as they could be. In that case, your labor costs are likely to be increasing significantly.

Why it's a problem: Every idle hour or misspent minute costs you money. Inefficient labor directly reduces your profit margins and can cause projects to fall behind schedule, leading to client dissatisfaction and potential penalty clauses. Unaccounted time can also lead to compliance issues with wage and hour laws.

How to fix it:

• Accurate Time Tracking: Implement a robust system for tracking employee time. This could include mobile apps with GPS features, biometric time clocks, or even detailed paper timesheets, as long as they are managed in a meticulous manner. Ensure all hours (including travel, breaks, and specific tasks) are accurately recorded.
• Optimize Scheduling & Workflow: Plan daily tasks meticulously. Ensure materials, equipment, and instructions are ready before the crew arrives. Minimize downtime from waiting or searching for tools.
• Cross-Training: Train your crew members on various tasks. This provides flexibility and prevents delays if one skilled worker is absent or busy elsewhere.
• Daily Huddles/Toolbox Talks: Begin each day with a brief meeting to review tasks, identify potential roadblocks, and ensure everyone is aware of their role.
• Regular Performance Reviews: Identify bottlenecks or areas where productivity can be improved. Provide training or reassign tasks as needed.

Red Flag #5: Lack of Financial Visibility & Untimely Reporting

Are your financial reports always weeks or months behind? Do you rely on gut feeling more than actual numbers to make business decisions? Do you only look at your bank balance at the end of the month? This means you're flying blind.

Why it's a problem: Without up-to-date and accurate financial information, you cannot make informed decisions. You won't spot cash flow issues, cost overruns, or unprofitable projects until it's too late. This lack of visibility prevents strategic planning and proactive problem-solving.

How to fix it:

• Invest in Good Accounting Software: QuickBooks Desktop or Online, Foundation Software, or other industry-specific solutions are essential. They automate data entry, generate reports, and track job costs.
• Maintain Clean Books Consistently: Don't let your bookkeeping pile up. Enter invoices, payments, and expenses regularly, ideally on a daily or weekly basis. This provides a real-time picture.
  • Review Key Reports Regularly: Cash Flow Statement - Review it weekly or bi-weekly to track where your money is going and coming from.
  • Job Costing Reports: Review weekly to compare actual costs against your budget for each project.
  • Accounts Receivable Aging Report: Review weekly to see who owes you money and for how long.
• Work Closely with Your Bookkeeper: A good construction bookkeeper isn't just a data entry specialist; they are your financial partner. They can provide valuable insights, flag potential issues, and help you understand your numbers, enabling you to make informed, profitable decisions.

Identifying and addressing these financial red flags isn't about adding more burdens to your plate; it's about building a stronger, more resilient construction business. By taking proactive steps and staying on top of your numbers, you can turn those red flags into green lights for growth and lasting profitability. Don't let hidden financial issues undermine your hard work on the job site – empower yourself with clarity and control.

 

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

 

 

This Podcast Is Episode 633, And It's About Cash Is King But Do You Have A Crown? Why Cash Flow Trumps Profit

This Podcast Is Episode 632, And It's About Navigating Job Site Challenges For Small Construction Businesses As a small construction business owner, you're not just a builder; you're a problem-solver, a negotiator, a project manager, and often, the first one on-site and the last one to leave. While the vision for a completed project is always clear, the path to getting there is often paved with unforeseen challenges, daily inconveniences, and persistent problems.   I've seen it time and again from my vantage point, both as a previous construction business owner and now a construction bookkeeping specialist: these job site issues, if left unchecked, don't just delay projects – they eat into profits, strain client relationships, and can even jeopardize the future of your business. But here's the good news: recognizing common pitfalls is the first step to conquering them.  

1. The Relentless March of Labor Shortages

The U.S. construction industry is grappling with a significant shortage of skilled labor. Finding qualified carpenters, electricians, plumbers, and other tradespeople can be a constant headache, leading to project delays, increased labor costs, and a struggle to take on new work.

How to Handle It:

• Invest in Training & Apprenticeships: Partner with local trade schools, community colleges, or established apprenticeship programs. Grow your talent by investing in on-the-job training for less experienced workers.
• Competitive Compensation & Benefits: Review your wage scales and benefits package. Offering competitive pay, health insurance, and retirement plans can significantly improve attraction and retention in a tight labor market.
• Employee Referrals: Encourage your current, trusted employees to refer candidates by offering a bonus for successful hires.
• Cross-Training: Train your existing crew members on multiple tasks to increase their versatility and cover gaps when a specific skill is in short supply.
• Utilize Technology for Efficiency: Leverage project management software to optimize scheduling and minimize wasted labor hours, maximizing the productivity of your existing workforce.

2. Escalating Material Costs & Supply Chain Disruptions

From lumber and steel to concrete and specialized components, material prices can fluctuate significantly, and supply chain issues can lead to frustrating delays. This unpredictability makes accurate bidding and project profitability a constant challenge.

How to Handle It:

• Early & Bulk Ordering: When feasible, order materials well in advance, especially for items with long lead times or volatile prices. Consider bulk purchasing when storage and cash flow allow.
• Multiple Supplier Relationships: Cultivate strong relationships with several suppliers. Having backup options is crucial for urgent needs or when your primary supplier faces delays.
• Price Escalation Clauses: Include clauses in your contracts that allow for price adjustments if material costs exceed a certain percentage, protecting your profit margins from sudden spikes.
• Explore Alternatives: Be open to using alternative materials or construction methods that offer cost savings or improved availability without compromising quality or code compliance.
• Real-time Cost Tracking: Utilize robust accounting and project management software to track material costs in real-time against your budget, enabling quick adjustments.

3. Navigating the Regulatory Maze: OSHA, Permitting, & Local Codes

The U.S. construction industry is heavily regulated, with strict rules from federal agencies such as the Occupational Safety and Health Administration (OSHA), as well as complex state and local permitting and building codes. Non-compliance can result in substantial fines, project delays, and legal liabilities.

How to Handle It:

• Prioritize Safety (OSHA Compliance): Implement a comprehensive safety program to ensure compliance with OSHA regulations and maintain a safe work environment. Conduct regular safety meetings (toolbox talks), provide proper Personal Protective Equipment (PPE), and ensure all workers are trained on OSHA regulations relevant to their tasks. Regular site inspections are key.
• Dedicated Compliance Officer: For larger businesses, consider designating a team member to be responsible for staying up-to-date on all relevant regulations and ensuring compliance.
• Permit Proactiveness: Start the permitting process early. Understand the specific requirements of each municipality you work in, as these can vary significantly.
• Consult Experts: Don't hesitate to consult with legal counsel, an experienced construction bookkeeper, or a safety consultant to ensure full compliance.
• Documentation is Key: Maintain meticulous records of all safety training, inspections, permits, and communications with regulatory bodies.

4. Poor Communication & Coordination Among Stakeholders

Construction projects involve numerous moving parts: your crew, subcontractors, suppliers, architects, engineers, inspectors, and, of course, the client. Miscommunication or a lack of coordination can lead to costly errors, delays, and friction.

How to Handle It:

• Implement Project Management Software: Utilize software designed explicitly for construction that enables centralized communication, scheduling, document sharing, and progress tracking, accessible to all relevant parties.
• Daily Huddles & Weekly Meetings: Conduct brief daily huddles with your on-site team to review tasks, address immediate concerns, and assign responsibilities. Hold weekly meetings with key subcontractors and the client for larger updates.
• Transparent Chains of Command: Define who is responsible for what and establish clear reporting lines to ensure accountability.
• Documentation of Decisions: Follow up verbal discussions with written summaries (emails or notes in your project management system) to avoid "he said, she said" disputes.
• Manage Client Expectations: Set realistic expectations from the outset regarding timelines, budget, and potential challenges. Implement a formal change order process for any scope adjustments.

5. Cash Flow Challenges & Budget Overruns

Delayed payments from clients, unexpected expenses, and inaccurate cost tracking can quickly lead to cash flow issues and projects spiraling over budget, jeopardizing your business's financial stability.

How to Handle It:

• Accurate Job Costing: This is my wheelhouse! Implement a robust job costing system that tracks every expense (labor, materials, equipment, subs) against specific projects. This helps you identify where money is being spent and where you might be losing profitability.
• Detailed & Realistic Bidding: Don't underbid to win a project. Include a reasonable contingency fund (typically 10-15%) for unforeseen issues.
• Progress Billing: Structure your contracts to allow for progress payments based on milestones achieved. This ensures a steady inflow of cash as work progresses.
• Aggressive Invoice Follow-Up: Don't let invoices sit unpaid. Have a straightforward process for following up with clients on outstanding payments.
• Leverage Technology: Utilize accounting software integrated with your project management tools to automate invoicing, track receivables, and monitor cash flow in real time.

Building Success, One Solution at a Time

Being a small construction business owner in the U.S. is not for the faint of heart. The challenges are significant, but they are not insurmountable. By proactively addressing these common job site problems with thoughtful planning, clear communication, strategic technology adoption, and a strong financial management system, you'll not only overcome obstacles but also build a more resilient, reputable, and profitable construction company that stands strong for years to come. Your foundation for success is built not just on steel and concrete but on sound operational and financial practices.

P.S. We wish our construction community fathers a "Happy Father's Day" this coming weekend for being actual builders, both at work and at home! Your dedication to your craft inspires those around you, and the strength you show on the job site mirrors the strength you provide to your family. Thanks for laying a solid foundation of love, support, and hard work in our lives. Enjoy your special day—you've earned it!

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

This Podcast Is Episode 631, And It's About Proven Strategies For Attracting Quality Construction Clients

As a construction business owner, you already know that winning new work is the lifeblood of your company. But not just any work—what you need are quality clients: the kind who pay on time, respect your expertise and give you the types of jobs that grow your bottom line.

As construction accounting and bookkeeping specialists, we've worked with dozens of contractors who struggle with the same thing: they're busy, but they're not profitable. Often, the root of the issue isn't in their craftsmanship or work ethic—it's in who they're working for and how they're finding those clients.

Let's talk about how to attract and retain high-quality construction clients effectively—and how to make sure those relationships support the financial health of your business.

1. Know Your Numbers So You Can Know Your Ideal Client

Before we even talk about marketing or referrals, you need to get clear on one essential thing: which clients are making you money?

If you're not tracking your job costs, labor hours, overhead, and profit margins by project, you're flying blind. I've seen numerous contractors take on high-dollar jobs that ultimately drained their resources and paid far less than expected.

Start by reviewing past projects:

• Which types of jobs were most profitable?
• Which clients paid quickly and didn't nickel-and-dime you?
• Which ones were time-consuming, unprofitable, or challenging to manage?

By tracking this through your bookkeeping system—ideally using job costing reports—you can identify which types of clients and projects contribute to a healthier, more sustainable business. That's who you want to go after.

2. Referrals Are Gold—But Only If You Ask for the Right Ones

Word-of-mouth is the #1 way most small contractors get new business—and for good reason. It's free, it builds on trust, and it often leads to high-converting leads.

However, here's the key: you'll need to be intentional about it.

Instead of saying, "Hey, let me know if you hear of anyone needing work," try:

"I'm looking to take on more [kitchen remodels/new builds/commercial maintenance] in the next few months. If you know anyone looking for that type of work, I'd appreciate an introduction."

Also, don't wait for the end of the job to ask. If a client is thrilled with your work halfway through, that's a great time to ask for a referral—when enthusiasm is at its highest.

3. Focus on Partnerships, Not Just Projects

One-off jobs can keep the lights on, but ongoing relationships will grow your business faster and more sustainably.

Some high-value partners to build relationships with:

• Real estate agents and property managers
• Interior designers and architects
• Developers or general contractors (if you're a subcontractor)
• Insurance adjusters (for restoration work)

These partners often have a repeat need for reliable contractors and can funnel steady work your way. If your books show a constant trend of high-profit jobs from just one referral partner, it's a sign that deepening that relationship is worth your time.

4. Create a Simple, Credible Online Presence

High-quality clients don't want to chase down a phone number scribbled on your truck.

You don't need a flashy website, but you do need:

• A professional-looking website or landing page with photos, testimonials, and contact info
• A Google Business profile with updated hours, service area, and reviews
• Active social media only if you can maintain it—even one or two project photos a month can help

When a potential client looks you up online, they should quickly understand:

• What kind of work do you do
• Where you operate
• Why can they trust you

Think of your website as your digital job site—keep it clean, clear, and professional.

5. Don't Underprice to Win Jobs—It Will Cost You Later

Here's where my accounting hat comes in: Undervaluing your work is one of the fastest ways to attract the wrong clients.

Many solopreneurs think lowering their prices will help them stay competitive, especially during slower seasons. But cheap clients often lead to:

• Constant change orders without pay
• Late payments or no payments
• Poor reviews or lack of referrals

And worst of all, it trains you to operate on razor-thin margins that won't sustain your business in the long term.

Instead, use your financials to understand your real costs—then price accordingly. Your rates should reflect not only your labor and materials but also overhead, insurance, taxes, and profit.

When you know your numbers, you can confidently say, "This is what it costs to do it right."

6. Offer a Great Client Experience—Then Ask for Reviews

Happy clients are your best marketing. But they don't always leave reviews unless you ask.

After the job wraps up:

• Send a quick email or text thanking them and asking for a review on Google or Facebook.
• Include a direct link to your review page (make it easy to access).
• Let them know how much referrals and feedback help your business.

Even five or six solid reviews can help you stand out in your local area. That kind of credibility fosters trust with discerning clients—the ones who conduct thorough research and are willing to pay more for quality work.

7. Invest Time in the Right Marketing Channels

Not all marketing strategies are effective for every construction business. Here's what tends to work best for small-to-mid-sized companies:

• Local SEO – Optimizing your website and Google profile for local searches (e.g., "kitchen remodeler in Austin") is a powerful strategy for enhancing your online presence.
• Project Signs – A simple branded sign on your job site can turn one job into three. Neighbors notice good work.
• Client Email List – Keep past clients informed with occasional updates, seasonal tips, and promotions. You'd be surprised how many people come back—or refer others—when you stay top of mind.
• Networking in Trade or Builder Associations – These groups often lead to strategic connections with other professionals who can send work your way.

You can track your results and focus your time on what generates quality leads.

Final Thoughts

It's Not Just About More Clients—It's About the Right Clients

Finding new clients doesn't mean saying yes to every job that comes your way.

The most successful construction business owners I work with are selective in their approach. They know which types of jobs make sense for them financially because they're tracking their numbers. They build systems that attract and retain the clients that make their businesses profitable, not just busy.

To attract more of the right clients, it starts with understanding your numbers and building your business around them.

Need help getting your bookkeeping organized so you can actually see which jobs are working for you? I offer tools and templates made specifically for construction businesses—and I'd be happy to point you in the right direction.

Want to get serious about growing your business profitably?

Check out our Construction Bookkeeping Templates—designed to help contractors like you track job costs, monitor cash flow, and make smarter decisions with every client.

Let's build a stronger business—one client (and job) at a time.

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

 

This Podcast Is Episode 630, And It's About Small Business Administration - Essential Strategies for Contractors

Running a small business is exciting, but let’s be honest, managing the admin side of things can feel overwhelming. Between keeping financial records, looking after daily operations, and ensuring compliance with tax laws, it’s easy to feel buried under endless to-do lists. But here’s the good news: with the right strategies, small business administration doesn’t have to be a headache.

Here are some practical steps to streamline your business admin, save time, and boost productivity, leaving you with more energy to do what you love – whether it's working at the jobsite or growing your business!

Why structure is the foundation of success

Think of admin tasks as the backbone of your business. If these tasks aren’t handled regularly and properly, things can quickly spiral out of control. Staying on top of your admin enables you to see how your business is truly performing, reduce legal risks, and ensure everything runs smoothly. 

  Here’s where accounting software can make your life easier:  

• Automated Bookkeeping: Track income and expenses without lifting a finger.
• Payroll Made Simple: Handle staff payments quickly and accurately.
• Real-Time Insights: Monitor cash flow and performance at a glance.

Popular tools like Xero or QuickBooks are ideal for small construction businesses seeking to streamline administrative tasks. And the best part? They store everything digitally, ensuring you’re audit-ready at any time.

Go digital with your records.

Paper receipts and ledgers are so last decade. Not only do they accumulate unnecessarily, but they’re also at risk of being lost or damaged. Transitioning to digital records is a crucial step toward administrative efficiency.

Here’s how to make it happen:

• Scan and Upload Receipts: Use mobile apps to digitize paper invoices.
• Cloud Storage: Securely store records online for easy access and backups.
• Spreadsheets or Software: Use spreadsheets for basic tracking or invest in platforms that allow you to tag and code transactions instantly. 

Digital records reduce clutter and make year-end tasks, such as taxes, much easier.

Organize the administration with task breakdowns.

Breaking admin tasks into daily, weekly, monthly, and annual routines will make them feel more manageable. Treat them like habits – they may be small tasks, but they add up to make a significant impact.

Daily Tasks

Devote just 15–20 minutes a day to knock out small but essential tasks like:

• Checking emails and responding to client queries.
• Logging sales and expenses into your accounting software.
• Scanning new receipts or invoices.

Weekly Tasks

Dedicate time weekly to review your business’s operational health:

• Pay suppliers and review outstanding invoices.
• Reconcile accounts to ensure everything has been logged correctly.
• Schedule social media or post updates to engage your audience.

Monthly Tasks

At the end of each month, set aside time for:

• Payroll processing (if you have employees).
• Reviewing inventory levels and replenishing stock.
• Analyzing your profit margins or hitting sales targets.

Annual Tasks

The big picture matters, too! Annually, focus on:

• Preparing your taxes (or outsourcing them).
• Reviewing your business plan and setting goals.
• Evaluating ongoing contracts, insurance, or subscriptions.

Breaking tasks into bite-sized chunks will help you stay on track and avoid falling behind.

Tip: Set calendar reminders to stay on track!

Pro Tip: Ask us about our "Five For Five at Five"

When to consider outsourcing?

If the admin is still consuming too much of your time, outsourcing can be a game-changer. Hiring a virtual assistant, part-time administrator, bookkeeper, or accountant can free up your schedule for high-impact tasks.

Here are some options to consider:

• Virtual Assistants can handle tasks such as appointment scheduling, data entry, and email management.
• Accountants and bookkeepers can ensure accuracy and compliance with tax laws, saving you from costly errors.
• Freelancers or part-time administrative staff can step in as needed without the cost of hiring full-time employees.

Outsourcing doesn’t just reduce your workload – it also gives you peace of mind that specialists are handling complex tasks.

Important Consideration:   Specialized accountants understand the nuances of the construction industry, including project costing and compliance with tax regulations, enabling them to provide tailored financial solutions. This expertise is crucial for navigating the complexities associated with managing construction finances and ensuring that your financial records are accurate and compliant with applicable laws.   Moreover, outsourcing minimizes the risk of errors that can arise from doing-it-yourself (DIY) accounting. Experienced specialists leverage advanced accounting software to track expenses, monitor cash flow, and prepare detailed financial reports. This precision not only aids in effective decision-making but also helps identify areas for cost savings and revenue growth. By having accurate and timely financial information, you can make informed decisions that positively impact your bottom line.   In Summary   Build a Sustainable Routine

The key to effective administration in your construction business lies in consistency.

Use Digital Tools: Leverage technology to stay organized and automate repetitive tasks, from invoicing to document management.

Establish Routines: Make your administrative tasks part of your daily or weekly habits to prevent them from piling up.

Seek Expertise: Don’t hesitate to get help when necessary. Whether through software or professionals, utilizing available resources can free you to focus on your core business.

By implementing these practices, you can establish a foundation for efficient operations and enhanced profitability in your construction business. If you’re looking for assistance in streamlining your administrative processes, don’t hesitate to reach out! Whether you have questions about your finances or need guidance on better practices, I am here to help. It’s time to work smarter, not harder.

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

This Podcast Is Episode 629, And It's About How To Optimally Allocate Resources For Construction Business Growth In the competitive construction industry landscape, efficient resource allocation is a fundamental pillar of success. Construction business owners like you face the dual challenge of meeting deadlines while adhering to budget constraints, making effective resource management essential.    As a business owner, you understand that growth doesn't just happen – it takes smart decisions, dedication, and a clear plan. One of your most critical decisions is allocating your resources effectively. Do you expand into new markets, invest in technology, or double down on customer acquisition? For many businesses, resource allocation is both an art and a science.   What is Resource Allocation?   Before we discuss strategies, let's clarify the allocation of resources. Simply put, it involves deciding how to allocate your resources—time, money, talent, and tools—to achieve your business objectives. It's not just a financial exercise but a crucial practice that determines whether your company grows or stalls.  

Construction companies can streamline their operations and boost productivity by strategically assessing project needs, prioritizing tasks, and leveraging technology effectively. The ability to adapt resources dynamically enhances project outcomes and contributes to overall profitability. Implementing well-defined strategies for resource allocation empowers construction firms to navigate complexities and optimize their performance at every stage of the project lifecycle.

Resource allocation is crucial for construction business owners to enhance productivity and ensure projects are completed on time and within budget. Here's why you should take resource allocation seriously:

• It ensures alignment with your business goals and vision.
• It helps you avoid wasting time and money on low-priority areas.
• It positions your business for competitive advantages through bold, forward-thinking moves.

However, a reactive or incremental approach to allocation can derail your plans. Without a clear system, you risk spreading yourself thin – or worse, missing opportunities for growth.

Understanding Challenges

Knowing where you'd like to invest is one thing, but figuring out how to stay on track is often more complicated. Why do so many construction businesses struggle with resource allocation? The answer lies in three common challenges:

1. The comfort of the status quo

It's easy to stick with what worked last year. For many companies, budgets are carried over without considering whether those plans align with the current strategy. Businesses often fall into this pattern, avoiding bold risks that could accelerate growth.

2. The impact of decision biases

Even the best leaders are influenced by biases, like anchoring on past successes or favoring familiar options over innovative ones. These biases can snowball within any business, especially when teams resist change or prioritize short-term gains over long-term objectives.

3. Fragmented processes

Resource allocation isn't a one-off task – it's an ongoing process. Yet, many businesses approach it without transparent governance or guidelines, leading to misalignment between strategy and execution.

The good news? All of these challenges are solvable with a thoughtful, proactive approach.

Here's how to take resource allocation from chaotic to productive. These steps focus on alignment with your long-term strategy while allowing you to adapt as conditions evolve.

1. Assess Project Needs: Begin by thoroughly assessing the specific resources required for each project, including labor, materials, machinery, and time. This helps in understanding the scope and scale of what's needed.

2. Prioritize Tasks: Identify critical tasks that need immediate attention. Utilize project management software to set deadlines and allocate resources effectively.

3. Prioritize High-Impact Areas: Not all investments are created equal. You can evaluate your business objectives to identify which initiatives will drive the most growth. Are you looking to improve customer retention, streamline operations, or scale a product line? Focus your resources on the highest-impact opportunities.

Pro Tip: Use the 80/20 rule - 80% of results often come from 20% of efforts. Identify the game-changers and invest in them.

4. Utilize Technology: Implement construction management software to track resources, budgets, and schedules in real-time. Tools like BIM (Building Information Modeling) can help visualize resource allocation needs more effectively.

5. Invest in Human Resources: Ensure skilled labor is available. This may involve training staff or hiring subcontractors to fill gaps in expertise.

6. Flexible Resource Pooling: Maintain a flexible workforce that can be adjusted to meet project demands. Cross-train employees to take on various roles as needed.

7. Analyze Past Projects: Review previous projects to identify what worked well and what didn't. Learning from past experiences can help you make informed decisions.

8. Budget Wisely: Develop a comprehensive budget that includes all potential resource costs. This will help track spending and ensure that allocated resources stay within financial limits.

9. Communicate Clearly: Establish communication channels among team members to ensure everyone understands resource availability and project timelines.

10. Regular Review and Adjust: Continuously review the resource allocation throughout the project's lifecycle. Be prepared to adjust as necessary to meet the project's changing demands.

How Can We Help?

Effective resource allocation in the construction business is significantly enhanced through meticulous bookkeeping and accounting practices. By maintaining accurate financial records, construction firms can track labor, materials, and overhead expenses, enabling precise budgeting and forecasting. This helps businesses to monitor their cash flow effectively, ensuring that sufficient resources are available.

We can help with regular cost control measures and Key Performance Indicators to identify discrepancies and prompt timely resource reallocation to keep projects on track. Additionally, specialized accounting software can streamline processes, providing real-time access to data and generating automated reports. Sound financial management empowers construction companies to optimize resource utilization, improve project profitability, and maintain a competitive edge.

Final Thoughts

A successful resource allocation strategy blends short-term execution with long-term aspirations. By aligning your daily decisions with your vision for growth, you'll create a resilient and future-ready construction business. Yes, it takes effort to go beyond the status quo and address inefficiencies, but the rewards are more than worth it.

Instead of operating reactively, take control of your resources to set your business on a winning trajectory. Whether you're a budding startup contractor or a seasoned construction business owner, these steps will help you invest smarter, outperform the competition, and achieve your ultimate goals.

Start by identifying one area where you can shift resources for greater impact. When these decisions feel overwhelming, there's no need to go alone. Time is your most valuable resource. Tap into our insights or receive guidance to create a growth plan. 

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

This Podcast Is Episode 628, And It's About Efficient Payroll Implementation For Construction Business Owners mplementing an effective payroll system is crucial for construction business owners, as it directly impacts project management, employee satisfaction, and overall financial health. Given the complexities of the construction industry, including varying pay rates, overtime requirements, and the need for certified payroll reports, developing a streamlined payroll process is essential.    Here are some steps to consider:   1. Determine Payroll Needs:

• Assess the size of your workforce (hourly vs. salaried employees).
• Identify the types of workers (e.g., subcontractors, full-time employees) and ensure your payroll system can handle various pay rates and classifications.

  2. Choose the Right Payroll Software:

• Look for software that caters to the construction industry's needs, including support for job costing, lien waivers, and compliance with prevailing wage laws.
• Ensure it has features for tracking time worked, overtime, and benefits.

3. Set Up Employee Information:

•  Gather necessary documentation for all employees, including W-4 forms, identification, and relevant licenses.
•  Enter employee data into the payroll system, including their pay rates, tax information, and benefits enrollment.

4. Establish a Time Tracking System:

• Implement a reliable method for tracking hours worked. This can be done via paper timesheets, digital time clocks, or mobile apps.
• Ensure the method complies with labor regulations regarding work hours and overtime.

  5. Understand Payroll Tax Obligations:

•  Familiarize yourself with federal, state, and local payroll taxes, including Social Security, Medicare, and unemployment.
•  Set up an account with the IRS and pay estimated taxes regularly to avoid penalties.

  6. Communicate with Your Team:

• Educate your employees about how the payroll system works, including how to report hours worked and any deductions they may see.
• Keep an open line of communication for any payroll-related questions or concerns.

  7. Run Payroll:

• Determine a payroll schedule (weekly, bi-weekly, or monthly) that best suits your business needs.
• Process payroll on time, ensuring accurate calculations for hours worked, overtime, and deductions.

  8. Maintain Compliance:

• Stay updated with labor laws and regulations specific to the construction industry to avoid compliance issues.
• Keep records of payroll transactions and employee information for audit purposes.

  9. Review and Adjust:

• Regularly review your payroll processes for efficiency and accuracy. Make adjustments as needed to enhance effectiveness and address any emerging issues.
• Consider soliciting employee feedback about the payroll process to identify any areas for improvement.

  By following these steps, construction contractor business owners can implement a payroll system that meets their operational needs and effectively supports their workforce.    Now, what if you already have a system in place? Upgrading or changing your payroll system offers numerous significant benefits. Saving time and money, making everyone's lives easier, and improving integration are good reasons to consider a change.   But if the switch is mishandled, the results can be catastrophic and lead to long-lasting problems. So, please make sure that you allocate the project the time it requires. While some people may indeed enjoy coming to work, earning money is the main reason most people seek employment. Our jobs make the world go round, supporting us and our families so that we can afford everything else in life.   Not receiving payment correctly is a significant issue for your crew. As a construction business owner, you want to ensure your employees are paid sufficiently and on time. This protects your business and their happiness.   Changing payroll systems is a huge undertaking. Many moving parts and people will be affected. Ensure that this project receives the time and attention it deserves. Determine what will be necessary to make the transition, understand who it affects, and communicate with everyone involved. The planning process is critical. Treat it as the foundation to making the switch, and the rest will fall into place.   The primary motivation for implementing a new payroll system is to simplify processes. Yet, many construction businesses overlook how their new technology can help. It's easy to lean on old methods for getting things done because they're familiar, but that would be a mistake when switching to a new payroll system.   Ensure you are familiar with and understand the features of your new platform. The real-time, monetary, and energy savings will be realized here. Automate anything you can. When these tools prove their worth, your team will understand the rationale behind the switch.   That is why we're here. Fast Easy Accounting streamlines construction payroll by offering specialized services tailored for the industry's unique needs. Our bookkeeping services are designed to seamlessly assist you with your payroll processes, ensuring efficiency and accuracy at every step. Here's how we can help:  

1. Tailored Solutions for Construction Payroll: We understand the unique challenges of construction payroll, such as varying pay rates, overtime calculations, and compliance with regulations. Our services are customized to meet these needs, ensuring every worker is paid correctly and on time.  2. Time Tracking and Data Management: We offer tools and systems for accurately tracking hours worked, including overtime and different pay classifications. Whether through digital time clocks or integrated apps, we help set up a reliable time management system that feeds directly into payroll, minimizing the risk of errors.  3. Compliance Assurance: Navigating payroll tax obligations can be complex, especially in the construction industry. Our bookkeeping services inform you about federal, state, and local regulations, ensuring you comply with all payroll tax requirements. We handle the calculations and submissions, allowing you to focus on your projects.  4. Efficient Payroll Processing: We streamline payroll by automating everything from calculating wages to processing payments. Automating these tasks saves you valuable time, allowing you to allocate resources more effectively.  5. Record Keeping and Reporting: Accurate documentation is critical for construction businesses, especially for audits and employee inquiries. Our services include maintaining thorough payroll records and generating necessary reports, such as certified payroll for government projects, that are easily accessible when needed.  6. Training and Support: We train your staff to use payroll systems effectively and provide ongoing support for any questions or issues. This ensures that your team feels confident and knowledgeable about the payroll process.  7. Monthly Reviews and Adjustments: Payroll needs can evolve as your business grows. We conduct regular reviews of your payroll processes and reports, making adjustments as necessary to enhance efficiency and address any new requirements that may arise. 

  Final thoughts   A well-implemented payroll system ensures that employees are paid accurately and on time and helps managers maintain compliance with labor laws and regulations. Furthermore, integrating payroll with project management and job costing enables better tracking of labor expenses and profitability for each project.    Deciding to change your payroll system is a big undertaking. But with some planning and preparation, it can be a smooth and rewarding transition.   For construction business owners, investing in a robust payroll solution means gaining a competitive edge, improving operational efficiency, and creating a positive work environment that fosters employee loyalty and productivity. By utilizing our bookkeeping services, construction business owners like you can ensure your payroll processes are compliant, accurate, and streamlined to support overall business growth and employee satisfaction. Let us handle the complexities of payroll while you focus on what you do best—building and growing your business.

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]

 

This Podcast Is Episode 627, And It's About The Essential Benefits Of A Purchase Order System For Contractors Running a small business is no small feat. Every purchase, every invoice, and every supplier relationship counts. But as your business grows, so does the complexity of managing procurement. This is where a Purchase Order (PO) System can help.    The importance of a POS for contractors cannot be overstated. In the fast-paced and often unpredictable world of construction, managing resources effectively is crucial for the success of any project. It is a fundamental tool that helps contractors streamline their procurement processes, maintain budget control, and ensure efficient communication with suppliers.   What is a Purchase Order System?   A POS tool helps businesses manage and automate the procurement process. It replaces manual methods with a structured, digital system to create, track, and manage purchase orders from start to finish. Think of it as your time-saving, mistake-reducing, cost-controlling ally in procurement.   

Do you need one? Let’s examine the benefits of using a purchase order system to help you decide if it is right for your business.

1. Reduce procurement time 

How much time do you spend manually tracking purchases or chasing up approvals? A purchase order system streamlines the entire process, liberating you from the burden of admin tasks. 

With just a few clicks, you can generate POs, send them for approval, and share them with suppliers. It simplifies requests by automating repetitive actions, helps you quickly process orders, and document all necessary approvals, freeing you up to focus on growing your business.

Quick Tip:

Look for a system that integrates seamlessly with your accounting software to automate even more of your workflow.

2. Enhance data quality 

Errors in procurement paperwork can lead to unnecessary spending or damaged supplier relationships. A PO system eliminates manual entry and tracks every detail, ensuring accurate and consistent records. You can keep track of materials and supplies needed for a project, reducing the risk of running out or over-ordering.

For example, automating data entry and storing everything in one place reduces mistakes, and locating records becomes much easier come tax season.

Quick Tip:

Choose systems with robust reporting features to give you insights into purchasing data.

3. Improve cost control 

Do you sometimes overspend because you aren’t tracking expenses in real time? A purchase order system changes this by offering real-time cost monitoring. It helps you manage your funds by clearly recording what has been ordered, how much it costs, and when payment is due.

The system links each purchase to a budget, instantly allowing you to see the impact. This ensures funds are appropriately allocated and prevents unexpected costs from creeping up. 

Quick Tip:

Ask us how we can set your PO system for you.

4. Streamline internal approvals 

How often do you deal with approval bottlenecks slowing down necessary purchases? With a PO system, approvals are digital, fast, and traceable.  It facilitates communication between you and your suppliers. They provide a formal way to convey requirements and expectations, which can reduce misunderstandings.

You can set up tiers of approval based on purchase size or department, and team members can quickly approve requests from anywhere. This gives you the control to make decisions without the hassle of paperwork. 

Quick Tip:

Implement systems that offer mobile notifications for approvals to keep things moving even when key decision-makers are on the go. 

5. Simplify compliance and audits 

Small businesses can find it daunting to keep track of compliance. PO systems create a clear audit trail, providing peace of mind that every purchase and approval is documented. 

In an industry where disputes can arise over the quality or timelines of materials, having a documented purchase order can safeguard contractors and suppliers. It establishes an explicit agreement regarding the purchase terms, offering a measure of protection should any issues arise. This legal backing can be invaluable in negotiations or as evidence in disputes.

Quick Tip:

For construction companies with complex regulations, ensure your PO system can handle complicated transactions and has audit-ready reporting features.

By formalizing the process of ordering materials, you can convey your requirements to suppliers. With a purchase order in place, both parties have a documented reference that outlines the specifics of the transaction, including quantities, prices, and delivery timelines, which fosters a more collaborative and transparent relationship.

This system creates a reliable audit trail. This is particularly important for financial reporting and compliance for contractors like you. Having a well-documented record of all purchases helps simplify the audit process, providing transparency and clarity that can build trust with clients, stakeholders, and financial institutions.

In conclusion

A purchase order system is not merely a bureaucratic formality but a vital contractor tool that supports effective budget management, inventory control, communication, legal protection, efficiency, and auditing. By incorporating a robust purchase order system into your operations, you can enhance your overall project management capabilities and increase the likelihood of delivering quality results on time and within budget.

If any of the challenges above resonate with you, then a purchase order system might be necessary to sort your procurement, save time, and control costs. Even for small construction businesses, the advantages, like improved efficiency and better supplier relationships, can have a significant impact as your operations grow.

Why not explore some options? Many PO systems offer free trials, giving you a risk-free opportunity to see how they could transform how you handle procurement. Start taking control of your purchases and setting your small business up for success. Chat with me today.

About The Author:

Sharie DeHart, QPA, is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]