You are an expert at what you do, but when you run a small construction business, you have to wear many hats to keep the company running. One of the least desirable aspects has to deal with your company’s finances and accounting. Here are a few considerations to try and make that job run more smoothly.
Track and stay on top of your receivables so you get paid.
No one wants to work for free and you would rather spend your time making money instead of tracking it down. First, you have to make sure you have a process in place to keep track of your open invoices so nothing slips through the cracks. When you issue an invoice, a receivable is recorded – meaning that a customer owes you money. As soon as you receive payment for that invoice, it should be applied and marked as paid. I know this is easier said than done and customer payments are often left to reconcile later on since there’s never enough time in a day.
At tax time you’re left with a bunch of customer payments sitting in your revenue account and a list of what looks to be unpaid invoices- that doesn’t make sense. The consequences include wasted time updating the receivables listing, overpaying on your taxes, and high bad debts. Making it a point to follow up on your receivables and apply payments to invoices on a monthly basis can save you in the long run.
Want to skip out on the manual updating of paid invoices? Consider using a combination of cloud accounting software and accepting online payments. Another option is to work with a factoring company that will purchase your invoices from you as soon as you issue them and give you the funds immediately. They then wait and collect the funds from your customer.
Dedicate a few minutes each week to organize your finances.
One of the most important things you can do to make sure your construction company is financially sound is to dedicate as little as 15 minutes each week to organize your finances and make sure you know what your balance sheet looks like. You’ll have more insights into your business, be able to make more informed financial decisions, and have everything organized when tax time approaches. Something always feels more pressing than your finances. But when you find the time every week, you’ll save yourself numerous potential headaches in the future.
Keep tabs on your labor expenses.
Payroll is likely to be one of your biggest expenses. Regardless of how many employees you have, make sure you track the costs of wages, benefits, overtime, and anything else associated with your employees. By tracking your spending on labor, you may find you have more money to incentivize your employees or that you’re outspending your budget. Additionally, overtime is expensive, and accurate timekeeping can help to keep those costs down. One option to help you accurately track employee time is by using a time clock or some type of tracking software. Doing the math now and accurately tracking the information can help you make better decisions later.
Make it a goal to be paperless.
If you are printing and snail-mailing your invoices, consider how much you’re spending on paper, envelopes, postage, and someone’s time to do so. Additionally, how much you’re spending to send payment reminders and late notices? And then how many trees have had to die so you could run your business and get paid? Going paperless by sending invoices via email is a better option.
Invest in technology that will help you work smarter, not harder.
Sometimes it is easier to try and take shortcuts to save a little money. But when it comes to tracking your business’s expenses you may want to bite the bullet and spend a little money. Software, such as QuickBooks, can help you reduce the likelihood of human error in your bookkeeping and is one of the best ways to ensure that your records stay accurate.
There are even phone apps that can greatly simplify the most basic tasks. From construction-specific calculators to collaborative punch lists, apps can greatly speed up many aspects for your team.
Ask for help when you need it.
It will cost you money to get the help of a professional but just think how much a horrible accounting error could cost you and your business.
Accountants have an intimate knowledge of the profession as well as tax laws in their area that will save you money almost every time. It can be tempting to DIY it to save money and do it yourself, but it’s rarely more cost-efficient in the long run. An accountant will almost always find more deductions and keep you penalty-free. On that note, the cleaner your records, the fewer billable hours you’ll have to pay, so make sure you’re organized year-round.
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