11 Min.
Construction Business Practices For Getting Paid And Paying Yourself Contractor Success Map with Randal DeHart | Contractor Bookkeeping And Accounting Services
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This Podcast Is Episode 570, And It's About Construction Business Practices For Getting Paid And Paying Yourself Running a small construction business may seem like hopping from one task to another, needing more support and guidance. That can make it tempting to let some to-dos on your checklist slide, especially those related to finances, which can be challenging and are often outside your preferred skill set or experience.
The issue, of course, is that clients can only pay you once you've invoiced them. And as you make your salary a top priority, you can also pay yourself. You need an invoicing system that makes the process less painful—or even removes it entirely from your hands.
There are some tips you can follow to keep your finances healthy and enable you to thrive. Here are some practices to improve managing your financials so you can have the best chances of success in your construction business..
Pay yourself
The business owner's salary is the line item most often left out of a small construction company's budget.
As a construction business owner, you may be tempted to keep putting every cent you earn back into your contracting business, but paying yourself first is necessary. You need to earn a living; paying yourself can help your business succeed. You need to pay your bills and be financially sound. You'll also need to have money set aside for your retirement.
Ensure you draw a regular income from your business to cover your expenses. Talk to your accountant for guidelines on how much to pay yourself, and always treat yourself as generously as you would your employees.
Reward financial milestones met and projections exceeded with a bonus. Raise your salary when your profit shows continuous growth. If giving yourself a raise creates some anxiety, do it in confidence, knowing you can always make adjustments as needed.
Have a separate business bank account
From day one, business owners should have a separate bank account to deposit their income and pay their business expenses.
Keeping your business and personal finances together makes it more difficult to track how your business is doing and how you're doing. Separate bank accounts for your business and personal finances allow you to monitor where and how you spend money more efficiently.
It's also crucial to designate a business-only credit card. During tax time, separate statements make submitting claimable expenses quick and easy while reducing painful audit risk.
Have separate accounts for your business and finances, and deposit your salary (see the above tip) into your account.
Have a good billing strategy
Every business owner wants to make money. Invoicing is typically one of the tasks that contractors like the least. Chores like creating and sending invoices are set aside for other more enjoyable or urgent tasks.
Eventually, you'll deal with clients who are slow to pay their bills. Money your clients owe you isn't accessible until it's in your bank account. The good news is that we have developed two solutions that can streamline your client's payment process:
Contractor Payment Application The difficulty often comes down to waiting for clients to pay their invoices. Chasing down one or two chronic late payers costs valuable time and money; if reliable clients stay caught up on one month, the result can be devastating. Many contractors use QuickBooks For Contractors to keep track of Job Costs and invoice their clients—it works well if you only have a few simple invoices.
The tricky part is when you get beyond two invoices, add some job deposits, and change orders because there is no "magic button" in QuickBooks to generate an invoice that will make sense to your client.
Randal DeHart created this Excel program for complex invoices, which shows the money trail from beginning to end in a way that everyone can understand and appreciate, which means you get paid faster, with less hassle, and your clients will love you
This Podcast Is Episode 570, And It's About Construction Business Practices For Getting Paid And Paying Yourself Running a small construction business may seem like hopping from one task to another, needing more support and guidance. That can make it tempting to let some to-dos on your checklist slide, especially those related to finances, which can be challenging and are often outside your preferred skill set or experience.
The issue, of course, is that clients can only pay you once you've invoiced them. And as you make your salary a top priority, you can also pay yourself. You need an invoicing system that makes the process less painful—or even removes it entirely from your hands.
There are some tips you can follow to keep your finances healthy and enable you to thrive. Here are some practices to improve managing your financials so you can have the best chances of success in your construction business..
Pay yourself
The business owner's salary is the line item most often left out of a small construction company's budget.
As a construction business owner, you may be tempted to keep putting every cent you earn back into your contracting business, but paying yourself first is necessary. You need to earn a living; paying yourself can help your business succeed. You need to pay your bills and be financially sound. You'll also need to have money set aside for your retirement.
Ensure you draw a regular income from your business to cover your expenses. Talk to your accountant for guidelines on how much to pay yourself, and always treat yourself as generously as you would your employees.
Reward financial milestones met and projections exceeded with a bonus. Raise your salary when your profit shows continuous growth. If giving yourself a raise creates some anxiety, do it in confidence, knowing you can always make adjustments as needed.
Have a separate business bank account
From day one, business owners should have a separate bank account to deposit their income and pay their business expenses.
Keeping your business and personal finances together makes it more difficult to track how your business is doing and how you're doing. Separate bank accounts for your business and personal finances allow you to monitor where and how you spend money more efficiently.
It's also crucial to designate a business-only credit card. During tax time, separate statements make submitting claimable expenses quick and easy while reducing painful audit risk.
Have separate accounts for your business and finances, and deposit your salary (see the above tip) into your account.
Have a good billing strategy
Every business owner wants to make money. Invoicing is typically one of the tasks that contractors like the least. Chores like creating and sending invoices are set aside for other more enjoyable or urgent tasks.
Eventually, you'll deal with clients who are slow to pay their bills. Money your clients owe you isn't accessible until it's in your bank account. The good news is that we have developed two solutions that can streamline your client's payment process:
Contractor Payment Application The difficulty often comes down to waiting for clients to pay their invoices. Chasing down one or two chronic late payers costs valuable time and money; if reliable clients stay caught up on one month, the result can be devastating. Many contractors use QuickBooks For Contractors to keep track of Job Costs and invoice their clients—it works well if you only have a few simple invoices.
The tricky part is when you get beyond two invoices, add some job deposits, and change orders because there is no "magic button" in QuickBooks to generate an invoice that will make sense to your client.
Randal DeHart created this Excel program for complex invoices, which shows the money trail from beginning to end in a way that everyone can understand and appreciate, which means you get paid faster, with less hassle, and your clients will love you
11 Min.