You take on a job with a customer and it may or may not be similar to something you have done before. You think you know what materials you need and about how many hours it will take. Then, at the end of the job, you are pretty sure you made money. Is there anything wrong with this method and thinking? Possibly.
First, you accounted for the majority of the big materials, but you maybe went a few little trips to pick up a few more things you forgot or underestimated (maybe on your personal debit card too). Second, your workers spent more time than estimated to get the project done. Third, a few unexpected surprises occurred during the job increasing materials or time (or both). That leaves you hoping you still made a real profit and, not surprisingly, hoping isn’t the best way to run a profitable business. So, how can you confidently price yourself and track your profitability?
1) Separate bank accounts and no intermixing of expenses.
This means that everything for the business and only the business comes out of the one checking account, making it easier to not accidentally forget about a business expense. It may often be the little ones, but they all add up. If you don't keep it completely separate, it is like trying to sift sugar out of sand.
2) Track your expenses in a bookkeeping software.
Utilizing a bookkeeping software will not only make tax time a breeze for you and take any stress out of the record keeping (if done correctly), but it will provide a method for you to sort through your expenses and categorize your money coming in and out. If you later need a loan for funding a project, growth or asset (maybe new equipment), it makes the funding of that much easier. It also helps when you are working with investors, allowing them to confidently work with you. You have so much money moving in and out that you want to account for every expense and understand where your money is actually going. If you aren’t sure where your money is being spent, it is hard to tell if it is working effectively for you, thus decisions to make your business better are much more difficult.
3) Add an Integrated Cloud-Based Digital Filing System
You will be organized including a digital filing system that you can easily send your Home Depot or Lowe’s contractor pickup information to, receipts to just from your phone, and much more. No more muddy, damaged, or lost receipts and no more confusion for you. In addition, you have a copy that doesn’t deteriorate over time like thermal imaging receipts do. The digital filing system can fully integrate with your accounting software (QBO or Xero) and it automatically sorts the uploaded documents. In addition, it is fully searchable by date, vendor, amount, and more.
4) Job Costing and Projects
Set up each job under projects or jobs so that you can designate what you spend money on for each job. This includes payroll, subcontractor pay, materials, and more. In QBO, you can keep an eye on your profitability at a glance so that you can keep the team and project on track consistently. You will also know if you priced the job properly so that you can go back to that as a reference for similar jobs in the future. Best of all, you will start to understand which kinds of job are more profitable so that you keep your business moving towards your goals.
5) T-Sheets or Time Tracking
There may be other beneficial tracking programs, but I haven’t seen anything as beneficial, complete, comprehensive and affordable as T-Sheets. A program owned by the same people who created Quickbooks, it seamlessly integrates with the accounting software. This makes paying your workforce easy as well as tracking the related expenses, but it does much more than that. It offers GPS tracking for your crew, on the fly time tracking according to the jobs, innovative scheduling, and easy reporting. You can look at where your crew is, what job they are working on and how many hours they are spending on that job. The crew is able to arrive at a job and start the time tracking easily for that job with a click on their smart phone. Your time reporting becomes more accurate and your guys are paid without guesswork.
6) Hire a Bookkeeping Professional
You know your business, I know bookkeeping. I keep you out of the paperwork and into the field where your real money is made. I save you not only time, but you trade frustration for peace of mind. In addition, I bring more to your business with the strategic planning.
7) Strategic Planning and Goal Setting
If you work with a proactive bookkeeper, like Upkeep LLC, you have someone helping you watch over your expenses and income, your job costing, accounts receivable and billing, and much more. With an outside perspective you will keep moving your bar of profitability. You can work with me to make strategic decisions and set goals that will really get your business to where you want it to be.
Imagine that you will not be able to run your business with more confidence but less paperwork than before. Sounds like a dream, doesn’t it? Don’t make the mistake that some contractors do and hope it all works out in the wash. Gain control over the money you work so hard for and it won’t control you any longer.