Contractor Success Map with Randal DeHart | Contractor Bookkeeping And Accounting Services Randal DeHart | Construction Accountant |PMP | QPA

This Podcast Is Episode 578, And It's About  Utilizing The Power Of Financial Modeling In The Construction Industry n the ever-evolving world of construction, financial modeling is a game-changer. It drives intelligent decision-making, minimizes risks, and ensures the revenue health of projects. Crafting precise and insightful financial models is a valuable tool for construction companies. It offers a panoramic view of the asset landscape and enables proactive planning and strategic management.
 
Financial models are invaluable tools designed to help you understand and protect your business's economic health. By simulating different scenarios and examining potential outcomes based on various inputs, such as sales growth, margins, and cash flow, these models provide a comprehensive picture that aids in informed decisions.
 
1. Precise Cost Forecasting and Budgeting
Financial modeling empowers construction companies to predict costs accurately, considering many factors such as material costs, labor expenses, equipment outlays, and overheads. Companies can develop precise project budgets by creating detailed financial models, spot potential cost overruns, and implement strategies to monitor expenses. This foresight allows for proactive cost management, preventing financial surprises that could impact project profitability.
Start by creating a base financial model incorporating your current financial data. Input variables such as projected sales, estimated expenses, and planned investments allow you to forecast your financial performance across different scenarios. By simulating best-case, worst-case, and most-likely scenarios, you'll be better prepared to navigate potential challenges and seize opportunities.
Action Tip: Develop your initial model using spreadsheet software or financial modeling tools. Regularly update it as new data becomes available.
2. Streamlined Cash Flow Management
Effective cash flow management is crucial in construction, where substantial capital outlays are often needed before revenues are realized. Financial modeling enables companies to map out cash flows over the project's lifecycle, identifying potential bottlenecks and ensuring adequate liquidity is maintained to support ongoing operations. By optimizing cash flow through meticulous financial modeling, construction companies can enhance their financial stability and seize growth opportunities.
Presenting a detailed financial model can significantly enhance your credibility with lenders and investors. It demonstrates your understanding of your business's financial position and showcases your preparation for future growth.
Action Tip: When seeking financing, ensure your model includes comprehensive projections showing how the funds will be used and the expected return on investment.
3. Informed Decision-Making through Scenario Analysis
Financial modeling allows construction companies to conduct scenario analysis, assessing the potential impact of various factors on project outcomes. Whether it's changes in material costs, fluctuations in interest rates, or delays in project timelines, scenario analysis helps companies evaluate the financial implications of different situations and develop contingency plans to mitigate risks. This proactive approach to risk management is invaluable in an industry where unforeseen challenges can have significant financial repercussions.
Financial models serve as robust decision-support tools. They help you evaluate the economic implications of various choices, whether setting pricing strategies, launching new projects, or considering investment opportunities.
Action Tip: Before making substantial business decisions, use your financial model to conduct a cost-benefit analysis. This will help you weigh the pros and cons and align decisions with your financial goals.
4. Assessing Project Feasibility and Profitability
By incorporating revenue projections, cost estimates, and financing structures in

This Podcast Is Episode 577, And It's About  Mastering Construction Business Finances Through QuickBooks Desktop The power of effective bookkeeping using QuickBooks Desktop - plus an Important Update from Intuit.
Keeping track of sales, earnings, expenses, and purchases is fundamental to your construction business's overall health and sustainability. Effective bookkeeping produces the data you need to evaluate your current practices, anticipate challenges, and set attainable future goals.
Many business owners dread bookkeeping and accounting tasks despite their proven importance. In fact, 40% of surveyed entrepreneurs claim that bookkeeping is one of the worst parts of running a business!
Is it worth the aggravation?
Here are three reminders of how effective bookkeeping is the cornerstone of small business success:
Keeping track of reimbursable expenses
A reliable system for tracking reimbursable expenses ensures you reap all the benefits you're entitled to when filing your taxes. Expenditures sorted into categories, such as "food," "travel," and "office supplies," can be cataloged quite simply with online bookkeeping software.
Using a dedicated credit card for business expenses and updating your records every month will put money back in your pocket come tax time.
Measuring profitability and planning for the future
To grow your business, you must be able to track and compare its finances from one year to the next.
In addition to reconciling the books and bank statements every month, effective bookkeeping generates records you can use to gain a comprehensive overview of your business. This data can help you:
Measure year-over-year profits; Identify opportunities to cut costs; Plan for major expenses (such as new office space, equipment, or staff) and develop data-based strategies for expansion. Preparing for tax season
Few things are more stressful for business owners than scrambling to prepare poorly maintained financial records for tax season. In addition to the panic of last-minute filing, inaccurate or incomplete documentation can lead to severe penalties, fines, and an audit.
In the United States alone, 40% of small businesses pay an average penalty of $845 per year for late or incorrect filings!
Sound bookkeeping can save you money and give you peace of mind. You'll be assured of compliance with regulations and receive a reliable estimate of amounts owing long before your tax bill is due.
If you've been following us over the years, you know that we are raving fans of Intuit, the makers of QuickBooks, and have used QuickBooks since the first version was released in 1992. In fact, in 2005, we moved our entire client base, including our own accounting firm's QuickBooks files, to an Intuit-approved commercial hosting environment so we could offer our clients all of the benefits of the full desktop version of QuickBooks accessible online 24/7, and it has been a huge success!
We've always encouraged our contractor clients to use QuickBooks Desktop as QuickBooks Online does not offer the full features of QuickBooks. We know that QB Desktop in the Cloud is one area where you can reduce your overhead and increase productivity quickly and easily. 
It is a powerful tool that can streamline your accounting processes and provide valuable insights into your company's financial health. Here are some reasons why using QuickBooks Desktop is crucial for your construction business: 
1. Industry-Specific Features: QB Desktop offers industry-specific features tailored to the needs of construction businesses. You can track job costs, create estimates, and manage progress invoicing, which is essential for staying on top of your projects' financial aspects. 
2. Robust Reporting: QB Desktop provides robust reporting capabilities, allowing you to generate customized reports to analyze your business's performance. You can track profitability by project, compare actual costs to estimated costs, and monitor cash

This Podcast Is Episode 576, And It's About  How To Build Up And Stand Out By Delighting Your Construction Clients Most businesses understand that customer satisfaction is crucial to their success. Happy clients are likelier to remain loyal, refer others, and leave positive reviews. This trend has only been amplified by social media and online review sites, where negative feedback can spread quickly and damage a company's reputation.
In an increasingly competitive marketplace, more than an effective customer service system is needed: you must provide customers with a positive and memorable end-to-end experience at every touchpoint. Creating powerful experiences that exceed consumer expectations can have massive implications for any business — from increasing brand loyalty and trustworthiness among current clients to being highly attractive to potential customers. 
It starts with understanding the difference between traditional customer service expectations and modern customer experience strategies. Keep reading as we explore the nuances of each approach and discuss how construction businesses like yours can strive towards offering excellent experiences in their markets.
Defining customer service and customer experience
When we talk about customer service and experience, it's not just about providing a product or a service. It's about the way you make your customers feel. Customer service is all about delivering the product or service in a way that exceeds expectations and meets the customer's needs. 
But the customer experience is entirely different. It's a holistic approach that considers how your customers are impacted from the minute they interact with your brand to long after they purchase or hire you. It's about creating an emotional connection with your clients and leaving a lasting impression. 
So, whether you're a small construction business owner, understanding the power of customer service and customer experience can take your brand to the next level.
The importance of customer service in the business
Have you ever walked into a store and received terrible customer service? Maybe the employee didn't acknowledge your presence or seemed annoyed when you asked a question. It's a frustrating experience and can leave a bad taste in your mouth about that business. 
That's why having good customer service is essential in any industry. It's not just about making a sale; it's about creating a positive experience for the customer. When customers feel valued and heard, they are more likely to return to that business and even recommend it to others. 
In a world with countless consumer options, standing out with exceptional customer service can make all the difference. Improving customer service is crucial for any business looking to stay competitive in today's market.
Strategies for improving customer service
Invest in employee training to equip staff with the necessary skills and knowledge to handle customer inquiries and complaints professionally and empathically.
Collect customer feedback to identify areas of improvement for products, services, and overall customer experience.
Implement technology solutions such as chatbots or knowledge bases to assist customers and streamline the resolution process immediately.
The importance of the customer experience
The significance of customer experience transcends the essential act of selling products or services; it's about crafting stories and memories that customers carry with them long after a transaction. A superior customer experience fosters an emotional attachment to the brand, transforming casual customers into passionate advocates and vocal supporters. 
Where choices are plentiful and attention spans are short, construction businesses that focus on delivering memorable customer experiences will not only distinguish themselves from competitors but will enjoy enhanced customer loyalty, increased satisfaction, and, ultimately, improved business outc

This Podcast Is Episode 575, And It's About  A No-fuss Record-keeping Guide For Your Construction Business Managing a hectic schedule and complex projects can be challenging if you're a contractor. You must also ensure that your paperwork, documents, and contracts are in order. It's essential to keep a paper trail of your work and practice due diligence. 
Keeping all your working documents in order shows that you treat your business, customers, and subcontractors responsibly. This is a mark of professionalism and can also help if you have an insurance or legal claim.
Contractor paperwork documentation and procedures
You should develop documentation and record-keeping procedures appropriate for your contracting operation or service if necessary. Once procedures are in place, it is equally important to ensure everyone understands and follows them. 
It's good practice to hold a workshop on documentation procedures with your employees and have them sign off that they understand and have copies of the procedures.
For construction jobs, some of the documents that may be obtained and maintained as part of your documentation procedure include:
Project tenders/estimates Contracts or work orders Duty to perform documents Site inspection forms Tests on work completed Documentation for materials delivered to the site Documentation of your risk services assessment Certificates of insurance from your subcontractors Using Digital Tools and Software
Implementing project management and documentation software can significantly reduce the time spent on paperwork. These tools can help track project progress, manage invoices, and store important documents securely in the cloud for easy access from any location. 
There are many options on the market, and it's unlikely that a single piece of software will meet all of your project management needs. Companies usually combine a few applications to create a custom solution.
Remember, the accounting software you need depends on the level of reports you require. This is why we recommend choosing project management tools that integrate nicely with the parts of your setup that don't need changing.
What to look for
Real-time reporting capability
Effective construction project management requires up-to-date information. With this, you can make important decisions if you rely on guesswork, which is a lousy way to do things.
The best project management tools for the construction industry offer instant reporting.
Accessibility
Your data must be as accessible as possible. The best construction project management tools are cloud/web-based, which makes them accessible from virtually anywhere in the world.
Good Support
Incorporating even the best construction project management tools will inevitably result in hiccups. That's why you should look for programs from companies with reliable customer support.
Security
Your data is precious and sensitive, and construction project management tools and techniques should reflect this. Before you incorporate any software into your workflow, research the company behind it, its terms of use, and the security measures it implements to keep your company's data private.
Construction project management tool checklist
Here are questions to ask yourself once you've narrowed your options using the above criteria:
Does the software come with enough licenses for my company? Can I use the tool on multiple devices? Does the software have several positive reviews? Will the company demo its software for my company? Can my current data be easily transferred to this new software? Do partner companies use the same software or a program that integrates well with this one? The proper construction project management tools can make a big difference to your company and its productivity.
I hope this helps identify the best picks and what you must consider when evaluating them. 
Proper record-keeping helps you manage your finances, comply with tax laws, and make i

This Podcast Is Episode 574, And It's About What Every Contractor Needs To Know About Successful Construction Companies  
Small construction businesses have several characteristics that distinguish them from larger firms. These characteristics include having a limited workforce, smaller revenue streams, and a more localized focus. 
They are often run by the owners themselves or a small team of employees. They tend to have a more personal approach to their work, as they are usually more involved in every aspect of the project. Due to their size, they are often more flexible and able to adapt to market or project scope changes. However, they may also face challenges such as limited resource access, difficulty securing financing, and increased competition from larger firms.
Over the years, we have had many successful construction clients. The seasoned ones have become lifelong friends and are now retired, living according to their terms. And several are still working according to their schedule with quality, high-paying clients.
Is it still possible to succeed in this industry, given the state of the economy? Regardless of government or environment, what I find common among them are these characteristics:
1. Owners leading by example
The construction company owner or project manager leads by example. They are usually the first to arrive and the last to leave. The owner knows everyone by name, and their presence is unmistakable. They show a strong commitment, setting the standard where they work. This commitment should be easy to understand. After all, if they don't work hard in their own company, how can they expect anyone else to take their business seriously?
2. Simple business structure
They operate a simple and open business structure, encouraging easy access to the owner for every employee. They value the contribution of each employee, many of whom are allowed to influence aspects of the construction business that would ordinarily be denied to them in a large hierarchical company
3. Communication among employees
Staff receive information as soon as the owner does. Goals, problems, and concerns are discussed openly. Feedback on issues is encouraged, and staff are asked to contribute their ideas for improving and overcoming difficulties. It is often this aspect of open communication that staff appreciate the most; it is unique to small construction businesses, whether you have only one or two staff.
4. The crew is carefully chosen
Staff is recruited very carefully because the contractor owner(s) recognize that they are the lifeblood of any small business. Staff are hired because their knowledge, skills, and abilities will benefit the organization rather than because of friendships or family relations. They are carefully chosen, nurtured, and trained to help the crew members and the organization from the relationship.
5. Staff commitment and loyalty
All staff are very committed and loyal. Good performance is rewarded with praise, extra responsibility, and money—poor performance is not. Poor workers are consistently removed as they upset the rest of the team. Organizations whose staff show optimum commitment and loyalty have a source of competitive advantage that is hard to copy or beat.
6. A unique service (or product delivery that goes with the service)
Most successful construction businesses have unique products or services, such as designs, products, systems, or some other aspect that sets them apart. This uniqueness is an essential source of competitive advantage and one that many companies work hard to sustain, adapting and innovating their products or services as their competition catches up with them.
7. A specific customer focus
Successful small businesses specifically focus on their customers and clients and are geared to supplying them with exactly what they want. This focus means adopting a market-led approach, with the owners and their managers consistently looking for ways to solve their

This Podcast Is Episode 573, And It's About Navigating Construction Cash Flow Challenges, Myths, And Facts In the world of small businesses, positive cash flow is king. The driving force keeps your business engine running smoothly, covering all your liabilities. But what happens when outflow exceeds inflow? Cash flow problems ensue, threatening the survival and growth of your construction business.
These cash flow problems can originate from various sources, including macroeconomic issues like recessions, natural disasters, wars, and microeconomic problems like business decisions and performance. However, careful planning and smart accounting practices can cushion or even avoid these financial blows.
Managing cash flow is a vital part of running a successful construction business. Some contractors think managing cash flow means tracking how much money enters and leaves their business, but more goes into it. 
[Starting Cash + Cash In - Cash Out] = Cash Flow Contractors and sub-contractors know there is more to profits than shown above, and most of you rely on your "gut feel" to see when the project has made a profit.
Unfortunately, many cash flow myths and misconceptions can lead to poor financial decisions. For a better understanding, how about a mindset shift first?
Myth: Profit equals cash flow. 
Fact: Profit is not the same as cash flow. A business can be profitable but still have cash flow problems. Profit is the amount left over after all expenses are paid, while cash flow is the amount of money that comes in and goes out of the business. 
Myth: Increasing sales will solve cash flow problems. 
Fact: While increasing sales can help improve cash flow, it is not a guaranteed solution. If a business is not managing its expenses properly, increasing sales will only exacerbate the cash flow problem. It's essential to focus on controlling expenses as well as increasing sales. 
Myth: Cash flow problems are always caused by slow-paying customers. 
Fact: Slow-paying customers can contribute to cash flow problems but are only sometimes the root cause. Factors such as overstocked inventory, underutilized equipment, or poor project management can also impact cash flow. 
Myth: Borrowing money is the only way to improve cash flow.
Fact: While borrowing money can provide a short-term solution to cash flow problems, other options exist. Construction businesses can also improve cash flow by reducing expenses, increasing sales, and negotiating better payment terms with vendors and customers. 
Construction businesses can make better financial decisions by understanding the facts about cash flow. 
Let's delve into some common cash flow issues and explore how you can manage them effectively.
Problem: Lack of cash reserves
If your contracting business's revenue drops, having enough cash reserves to cover up to six months of expenses can be a lifeline.
Solution: Project your cash flow by estimating your sales, determining payment timelines, and estimating all expenses. Your accountant can help you create cash flow projections in your accounting software so you know where you stand financially.
Problem: Expensive borrowing
High-interest credit cards and business loans can significantly affect your business's revenue.
Solution: Consider supplier financing or refinancing loans to secure lower payments. Term loans with competitive rates can also help improve cash flow.
Initiate a discussion with your lenders if interest only or deferred payments on outstanding debts are possible.
Request more flexible payment options
It never hurts to ask, especially if you've been transacting with your vendors for a long time and you've established a certain level of mutual trust and confidence. You can request more flexible payment options or longer payment terms.
Tap into available credit lines
Take advantage of available lines of credit and place the funds in interest-bearing accounts.
Problem: Decreasing sales or