474: Bad Business Practices In Construction Bookkeeping

This Podcast Is Episode Number 474, And It's About Bad Business Practices In Construction Bookkeeping One of the biggest challenges construction company owners like you have with an in-house bookkeeper is training them to work for your best interest, not theirs, and deliver consistent results and the reports you can trust daily, year after year.   Having been involved with construction and construction accounting and bookkeeping for over thirty years, we have seen a consistent pattern repeated over and over that will turn ordinary, decent, pleasant bookkeepers into a disheveled, broken, mean, nasty, arrogant trolls, and that's a good day when the sun is shining, and the birds are singing!  

Here's how it happens: 

Someone is assigned the construction bookkeeping duties, and they are typically mild-mannered, shy, and unable to say no. The newly appointed "bookkeeper" opens the QuickBooks Pandora's box and loads the CD in the computer, believing it will be set up and ready to go in ten minutes.  That's when the first of several unpleasant surprises happens; the pop quiz. QuickBooks screens start popping up and asking questions! Nobody said anything about a test or an exam, and panic began to take hold. The bookkeeper thinks, "don't screw this up because I can't afford to lose this job!" The questions keep coming like a raging river, so to put the responsibility on someone else, the bookkeeper asks the contractor for help and is told: "I don't know, you're the bookkeeper. Go figure it out. I'm busy!" Luckily QuickBooks has a guided tour of QuickBooks setup; unfortunately, the bookkeeper charges forward, taking all the default answers suggested by QuickBooks, and in just over two hours, QuickBooks is set up horribly wrong.

Choosing the correct QuickBooks Version is the most critical part of all because it is the foundation upon which your entire financial system is built. Put the wrong foundation under your business, and it will not matter who is doing the bookkeeping because it will always be a mess, and you will never get the reports you really need to operate and grow your construction business profitably.

Contractors who do not earn much money see bookkeeping as overhead which costs money and therefore is a drain on profits, so they get a cheap computer, tiny monitor, garbage printer, tiny desk, and broken-down chair.

The contractor assigns additional tasks to the bookkeeper to get their money's worth. "Go fetch" and do everything - like personal errands, delivering materials, supplies, and paperwork to the job site, handing over all usernames and passwords to buy and pay stuff, making coffee, answering the phones, taking out the trash, cleaning the bathroom—anything and everything to get "value" out of the time and money wasted on bookkeeping. Contractors can miss many deadlines but miss a payroll, and they are out of business. The day that happens, your staff is looking for a new job no matter what they tell you. The contractor gets angry, makes deep noises from the chest sound like important messages from the brain, and blames the bookkeeper for the missed payroll. What has now evolved into the incompetent bookkeeper will respond with something like: "The time cards never arrived, so I could not process payroll!" The contractor simply responds with something like: "You should have figured out how to get them even if it meant using your car, your gas, your personal time and have gone to the job site and got them; it's your fault! I depended on you to do your job, and you let me down!" This is where the ordinary decent, pleasant bookkeeper starts growing an attitude, thinking you don't understand how complicated bookkeeping is with a program like QuickBooks that is all screwed up and won't work right! Getting anything done in QuickBooks is an immense fat royal pain, let alone all the other stuff the contractor wants to do. The bookkeeper thinks you don't know or care because you hired them to take care of the paperwork, and that is precisely what you did because in business, you produce reasons or results, and reasons don't count. Next, your vendors and suppliers don't get paid on time, or worse yet, you miss the 2% discount if paid by the 10th, which in effect means you are paying a 36% annual interest rate penalty, and when you ask why, the bookkeeper says they didn't have enough time to get the bills into QuickBooks. Next, the payroll tax returns, sales tax returns, labor and industries tax returns, business and occupation tax returns, city licenses, and liability insurance audits start slipping, and the fines and penalties add up.

These bad business practices can frustrate you or any construction business owner because you've now realized it is a costly mistake. These do not even include overpaying income tax, lost productivity due to stress, and several other unknowns.

Now you have three responses; fight, flight, or replacement. Fight and demand could get it done, but how reliable (your reports) will it be? Flight and hiring another in-house bookkeeper could only repeat the process. Or you can save time, money, and aggravation by outsourcing to a competent construction bookkeeping service. The choice is yours; consider it before allowing these bad business bookkeeping practices to drive you insane. Protect yourself and your business. As we always say, you deserve to be wealthy because you bring value to other people's lives.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com