Congratulations, you have just picked up your first construction client!
As an Certified QuickBooks ProAdvisor, a “contractor” or a Bookkeeper/Office Manager has contacted you for a contractor because they need “help” with their QuickBooks file. The chances are good that you have completed one of the various “New Client Interviews” that are readily available, you arrive at the contractor’s office, and start to review their current QuickBooks setup only to find:
- A Chart of Accounts that is so long it could easily be considered a “book” OR one that is so short you wonder how they manage to keep accurate records.
- An Item List that is so long that it too could be considered a “book” OR one that consists of only a few items.
- A Payroll Item List that is so long that it too could be considered a “book” OR one that consists of only a few items
In the case of the Chart of Accounts, Item, and Payroll Item Lists feeling like “books” most ProAdvisors first thought is “oh what a mess, we need to clean this up!”
STOP!
This initial reaction may not be the best approach to dealing with a construction client, so let’s address some areas that most of the New Client Interviews I’ve ever seen – never take into consideration. Also, remember that your construction clients in-house management reporting needs do not, and probably will not, perfectly line up with financial-statement or tax return reporting requirements. However, you will find it worthwhile to help them retrieve the information that they desperately need – even if it means a bit more work from you or their Accountant on a periodic or year-end basis.
So, let’s talk about some of those questions that are not in the New Client Interviews, it is impossible to cover all of them, but you can certainly add these to your “list”:
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As you can see these questions will help you to zero in on their needs and you can then help them set up a QuickBooks file that will be a “workhorse” instead of one that “underperforms” and causes frustration.
QuickBooks will not automatically provide some of the solutions to the needs of contractors, for example: tracking Retainage, equipment costs, union or bona-fide plan fringe benefits – but properly setup QuickBooks “can be made” to do so; and of course, there are always third-party applications that will help with the “tough stuff”.
Now that you have some more information about the client’s needs – your first step should be to help them (and yourself) get organized by making a list of their needs! However, before you begin implementing new procedures – you should review their current QuickBooks file to make sure it will provide them with the desired results.
An infusion of federal infrastructure funding through the American Recovery and Reinvestment Act (ARRA) have had and will continue to put more contractors and their employees back to work. Federal investment in Public Works projects will create jobs throughout the country and not just construction jobs.
While additional public infrastructure projects will allow the construction industry to maintain their current workforce and will even necessitate hiring more workers. You will also see contractors who have previously worked on other types of construction projects (residential and/or commercial) begin bidding on newly created Public Works projects.
This will also encourage contractors to purchase equipment, thus preserving and creating manufacturing jobs.
As a Certified QuickBooks ProAdvisor or Accounting Professional who is working with construction clients – you are entering into a very challenging experience!
More demand for construction savvy accounting professionals.
Contractors who will perform work on these government funded public works construction projects will face new bookkeeping, accounting, and compliance issues that they may not have faced before, therefore, they will be seeking help and advice (aka consulting time) from construction savvy accounting professionals who support QuickBooks – specificically in the areas of improved job costing and the preparation and submission of certified payroll reports; which are required on government funded construction projects valued over $2,000.00.
The terms “construction and contractors” are vague and widely misused terms which cover everyone from the local handyman who makes repairs/improvements on your house to the contractor who is building or repairing a bridge on your local highway.
Let’s talk about construction projects
In general, there are three types of construction projects that contractors can be involved in, each having their own unique accounting and compliance issues:
- Non-Residential Building which includes the actual process of building, creating, or repairing commercial, manufacturing, educational, religious, administrative, recreational, hotel, dormitory, and other actual buildings. These types of project may require the submission of AIA format billings and/or certfied payroll reports – in order for the contractor to be paid.
- Residential Building which includes the actual process of building, creating, or repairing single family homes, multi-family homes, and apartments and other buildings of this nature. These types of projects may require the submission of AIA format billings – in order for the contractor to be paid.
- Heavy/Highway, Industrial, or Non Building construction which includes the building or repair of streets, highways, bridges, dams, reservoirs, river and harbor developments, sewage and water supply systems, missile and space facilities, airports, utilities, public works projects, and communication systems; just to name a few. These types of projects may require the submission of AIA format billings and/or certified payroll reports – in order for the contractor to be paid.
AIA format billing is a “standardized” method of billing developed by the American Institute of Architects.
