**Editors Note. For all of you reading this I know in my heart that there are some of you exactly like this contractor. I was never exposed to a company like Randal’s while in business but I probably would have acted the same way Bruno did. It’s a control thing and it’s stupid. We aren’t any less macho or accomplished if we let that which we know very little be completed correctly by someone who does. I think of how many times I let my pride get in the way and although I didn’t keep track of the outcome I’d venture to say it was almost never good. If there is one thing I would advise you of is don’t let your accounting be done by an unaccomplished bookkeeper? Just pay Randal or someone like him (We know you’re one of a kind, I’m just saying) to do things the right way every time. The subcontracting business is too tough and you need allies, if for no other reason than to tell you it’s time to get out before you lose everything. Believe me I know from experience, hind sight gives you a certain wisdom.
This Article Will Focus On Nine Steps to Bookkeeping for Plumbing Contractors
Plumbing Contractors Bookkeeping Services – Is something every bookkeeper needs to first understand before they can learn it. Hundreds of contractors and their in-house bookkeepers have told us how easy QuickBooks can get messed up and it is so true!
Operating A Backhoe – Is easy too! Several years ago in a failed effort to “save time and money by doing-it-myself” I rented a
backhoe to save time and money. Instead of saving time and money, I got an expensive lesson on just how easy it is to find underground utilities and bring them to the surface with the greatest of ease like the daring young man flying man on the trapeze. It was very entertaining and extremely costly!
We Were Contacted By – A contractor Bruno Brickman* about taking over the day-to-day bookkeeping chores from his wife because she threatened to leave him and file for divorce. Bruno asked for lots of information that his wife had no idea or any desire to learn how to get it for him.
We Spent Time Reviewing – Bruno’s QuickBooks file and interviewing him to understand exactly what he wanted before proposing the following solution:
- He would maintain complete control of his money
- We would take over 90% of his paperwork
- Keep him informed of what bills needed to be paid and when they were due
- Keep track of customers who owed money and let him know when they were past due
- Store his important bookkeeping and contract documents on a paperless server
- Process payroll for four employees including draws, garnishments and child support
- File the monthly and quarterly tax returns for payroll, sales tax and city tax returns
- Reconcile all of the banks, credit cards and vendor statements
- Provide 24/7 cloud access to the Five Key Performance Indicator Financial Reports
- Provide ongoing support and general consulting to operate and grow his company
- All for less than $300 a week
Bruno Chocked And Gagged – Almost fainted and used a few choice words. He was upset over the idea of having to pay anything since his wife was working for FREE! How dare we expect so much money for pushing a few buttons on a keyboard?
After A Short While Bruno Calmed Down – And we suggested perhaps he needed an interim step before transitioning to an outsourced contractors accounting service. We provided him with two documents. A Guide To Hiring An In-House Bookkeeper and a Guide To Hiring A Contractor Bookkeeping Service.
Bruno Let Happy – Armed with the two guides he was a man on a mission to get his contractor bookkeeping services done for a lot less than $400 a week! He immediately put an ad on Craigslist and the local newspaper and was flooded with responses.
This Is Lucy Bad-Bookkeeper* Story – One fateful Monday morning she answered Bruno’s ad for a bookkeeper. Bruno made it clear during the interview that he was looking for a cheap bookkeeper who understood construction bookkeeping services and accounting at a very deep level and someone with the skills for getting the most out of QuickBooks For Contractors.
(*Lucy Bad-Bookkeeper and Bruno Brickman are not their real names)
Bruno Wanted Accurate And Timely – QuickBooks financial reports and Job Costing Reports in order to operate and grow his construction company. Bruno offered Lucy $15.00 an hour for 10 hours a week and since Lucy was desperate for a job after her previous construction company employer filed bankruptcy, she accepted the offer with the hidden agenda that all contractors including Plumbing And Mechanical Contractors were evil and she would get even with all of them if it was the last thing she ever did!
We Offered One Hour At No Charge – To help whomever Bruno hired to get some questions answered if they felt they need it. Bruno insisted Lucy contact us to get some free training. Lucy and I spent an hour on the phone and I shared a quick overview of what I call the Nine Steps to effective and efficient contractor bookkeeping principles at no charge.
A Few Weeks After Our Phone Conversation – I stopped by to see how everything was going for Lucy and Bruno. We reviewed the Nine Steps to determine how well she was using what she had learned.
Step #1 Sort Paper Into Manageable Piles
Lucy Had No Experience With Construction – To the contractors, construction workers, USPS mail carrier, shipping and receiving clerks, warehouse workers and other folks that stopped by her desk to leave a few pieces of paper for her to deal with. The ocean is a collection of drops of water and one drop by itself is not a problem; however added together they can become overwhelming. The piles of paperwork quickly grew huge and unmanageable.
Step #2 Simple Data Entry
After Sorting The Paperwork – As she could Lucy moved on to dealing with the easiest and fastest part of contractor bookkeeping which was inputting in checks, bills and simple invoices into QuickBooks because that part was easy.
Step #3 Payroll And Tax Reporting
Payroll And Tax Reporting – Is hard and for the most part it tends to bring out the worst in people including Lucy. In fact, some of the construction workers who always turned in time cards late said she was ready to bite the next person who waited until payday to turn in their time card and expect her to jump through hoop to see to it they get paid on time.
Step #4 Reconcile Bank & Supplier Statements
Reconciling Statements – Was something Lucy had never done at her previous bookkeeping job at the solo-entrepreneur handyman contractor where she was part-time bookkeeper. During our brief chat, the entire subject of reconciliations seemed to confuse her. Lucy said bank and supplier reconciliations were a waste of time and busy work. I asked who did it at her previous job and she said they never did it; however, it was discussed just before the solo-entrepreneur handyman filed for bankruptcy.
When Bruno’s Checks Started – Bouncing and suppliers were being paid twice for the same bills Bruno was in full-blown panic mode and decided to invite us to come to his office and train Lucy how to reconcile bank, credit card and vendor statements and be trained on some of the gaps in her construction accounting knowledge. Bruno agreed to invest $3,000 in direct cost for Lucy’s bookkeeping education.
After 20 hours – Of attempting to condense the most important parts of a 10,000 construction accounting services skill sets that Lucy needed to be useful in her position of contractors bookkeeping services over a 5 day period at $150 per hour totaling $3,000 Lucy had just enough training to do the reconciliation part of the job.
Randal’s Patience Began Wearing Thin – Because Lucy talked, argued and wanted to continually tell Randal how different things were at her previous job, where the solo-entrepreneur handyman contractor went bankrupt.
Lucy Spoke Endlessly – About how nice it was to have plenty of time to shop online, surf the web, text her friends and train her boss like an organ grinder trains a monkey. Lucy wanted to ramble on endlessly about how stupid and ignorant her previous boss the solo-entrepreneur handyman was and how he didn’t know anything about running a construction company.
Lucy Kept Repeating If Only He Would Have Listened To Her – He never would have gone bankrupt. In fact, she bragged about having posted a running commentary on Facebook and described in detail how incompetent her boss was and how she knew the construction company was going bankrupt. Randal ignored it did his best to keep her focused on learning construction bookkeeping services.
It Was Obvious – Lucy was a bad bookkeeper with a severe attitude problem. When I tried to discuss the issues with Bruno he immediately got defensive and suggested I was trying to take over his bookkeeping. I agreed that I thought that would be best in the long run; however, I respected his decision to keep Lucy and strongly urged Bruno to find another QuickBooks and construction accounting training option because I refused to take any more of his money. Bruno agreed and said he was not about to waste any more of his time and money on any QuickBooks training. Unfortunately, Bruno did continue to pay for training indirectly in the form of bounced checks, missed quarterly tax returns and payments, which led to costly penalties and interest, lost early payment discounts and other expensive mistakes.
During The Quarterly Construction Bookkeeping Services Review – Randal showed Bruno a production report that revealed the cost of having Lucy on the payroll for the first twelve weeks was $691.08 a week when Bruno had expected to spend only $150.00 a week plus a little money for payroll taxes and overhead. Bruno was very unhappy to say the least.
Lucy’s Cost Per Month On Bruno’s Payroll:
- Lucy’s Payroll Cost With Taxes And Overhead Per Month $1,095.73
- Monthly Mistakes, Bounced Check Fees, Late Fees And Penalties $500.00
- Randal’s Time To Tutor Lucy On Construction Bookkeeping $1,000.00
- Lucy’s Time On Payroll To Be Tutored $168.60
Total Per Week $691.08
Total Per Month $2,764.33
Total For First Three Months $8,292.99
Bruno Was Very Unhappy – But unwilling to give up too easily which is a common trait among all contractors not just Plumbing And Mechanical Contractors. Paradigms are hard to change which is why the Universe has instilled everyone with a pain meter so that when the pain of change exceeds the pain of staying the same; change is made. Incidentally, it is not a coincidence the more successful and profitable a contractor is the more adaptable they are to change. In fact, Darwin wrote extensively about “Survival of the most adaptable”.
Step #5 Complex Journal Entries
Bruno Was Surprised – To learn that complex journal entries like entering a HUD-1 statements and complex Payment Applications similar to the G702 and G703 format was something else Lucy knew absolutely nothing about.
Lucy Refused – Announced to Bruno that those things were not in her contractor bookkeeping services job description which was
funny since Bruno did not provide a formal documented job description; just a verbal outline.
When A Contractor’s Bookkeeper – Refuses to do something related to the construction bookkeeping services and the accounting functions of the construction company it is usually a sign of bad bookkeeper traits Bruno would have saved a lot of time, money and heartache if he had simply opened his mind, questioned his Paradigm and paid attention.
Bruno Outsourced – The complex journal entries, HUD-1 Statements and complex payment applications to Fast Easy Accounting because the construction bookkeeping services work needed to be done right and on time.
Step #6 Prepare Tax Reports
Lucy Had Filed – The Payroll quarterly tax return at her previous job, not always on time. She would eventually get around to doing them eventually so Bruno left her alone to do them and in the end Bruno’s construction company paid a string of late fees and penalties.
Step #7 Key Performance Indicators
The KPI – Key Performance Indicators are simply five reports take five minutes and they give the construction company owner a snap shot of how the business is doing financially and taken seriously can lead to some serious cash flow coming into their business, and staying there.
Bruno Asked Lucy – To prepare and print the Five Key Performance Indicators and have them on his desk every day by five PM. Lucy had more important things to do which involved posting her observations about Bruno on her Facebook account. When Bruno asked Lucy about the reports, she would get upset, angry, act hurt and remind Bruno about some other pressing problem he needed to handle (see bookkeepers train their boss like an organ grinder trains a monkey). After a while Lucy had effectively trained Bruno to quit asking.
Step #7 B No Key Performance Indicators
Bruno Got A Call – From a friendly competitor who said he was going bankrupt and asked if Bruno wanted to buy some of his tools and equipment before the auction. Bruno asked what happened and the fellow mumbled something about a bad bookkeeper took some money, unfiled and overdue taxes, material suppliers cut him off for not paying his bills, his employees quit because their payroll checks bounced and they took a bunch of tools and equipment to the pawn shop and the Washington State Department of Labor and Industries was getting ready to audit him for non-payment.
Step #8 The 5×5 Business Stabilizers
Bruno Remembered – Reading an article titled The General Contractor And The River Of Construction Commerce and there was something about the five key reports in it and some other information that he could review because he certainly did not want his construction company going bankrupt!
Step #9 Good Bookkeeping Leads To Informed Decisions
In The End Bruno Decided – We were in fact a less expensive alternative and we arranged to discount our fees to make up for the $3,000 he had wasted on her training. Since we included a Business Process Management System (BPM) for construction companies he was able to get his construction company back on track.
Lucy Found Employment – With a smaller construction company at lower hourly pay and more hours. She had to use her car to run errands, get coffee for the boss in addition to being attempting to perform the duties of a contractors bookkeeping services specialist. When nobody was watching she shopped and played games on the internet, updated her Facebook page and other social media sites, instant messaged her friends and talked with them for hours on her cell phone. And Lucy found a new source of income by selling job leads from her new employer to his competitors which she met on social media!
All Is Well That Ends Well Except For The New Contractor Who Hired Lucy; Everybody Else Went Home Happy!
This Is One More Example of how Fast Easy Accounting is helping construction company owners just like you put more money in the bank to operate and grow your construction company. Construction accounting is not rocket science; it is a lot harder than that and a lot more valuable to people like you and me so stop missing out! or firstname.lastname@example.org and schedule your no charge one-hour consultation
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About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington, www.FastEasyAccounting.Com He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Plumbing Contractor, General Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Contractor Accounting Specialist, Bill.Com Guru and Tsheets ProAdvisor. Check out our Contractor Success Map Podcast on iTunes and Follow Randal on Google+
I leave you with this heartfelt blessing – “Being a contractor is a calling and in most cases it can be a long hard road. Take heart and know that you will be blessed for all of the good you do”
Randal L. DeHart, PMP, QPA