EstimatingTV

8 Steps to improving the financial health of your contracting company.

How many times, in diet-obsessed America, are we bombarded with advertisements and infomercials promising us dramatic weight loss and six-pack abs … in just weeks! A pill, a morning shake, the no-carb/high-carb/all-protein/low-protein diet is all it takes to turn around years of unhealthy eating and sedentary habits. Pleeease! We all know it takes hard work and lifestyle changes to really make a difference over the long haul.

And so it is with the financial and accounting health of a business. Owners looking for quick fixes or instant, revenue-boosting results will be as disappointed as the yo-yo dieter. Realistically, you need to invest time and effort in order to reap long-lasting rewards. What follows is an 8-step plan for improving the financial health of your company. It comes with no promise of miraculous double-digit profits or financial utopia. But it will force you to make the necessary changes to help your company become, well, better next year. Think of it as an exercise regime that will slowly and gradually reduce inefficiencies and excesses, while increasing your company’s competitive advantages and profit-building opportunities.

Whether your organization operates at the height of efficiency or back in the Stone Age, there is always room for improvement. As the construction industry continues to become more sophisticated and complex, contractors will undoubtedly face stiffer competition for jobs, slimmer profit margins, and greater reporting challenges. The stakes are high for business owners who operate at status quo.

Technology makes simple work of this all-important task

Overhead allocation is one of the most misunderstood concepts that you will face in running your business. But it is also an essential task ­ – worthy of a great deal of attention - – because it is central to determining your company’s profitability and real bottom line.

On the surface, overhead allocation seems simple. As opposedIn addition to direct costs for material, labor, subcontractors and equipment, you need to account for indirect costs, – or overhead. Figuring out overhead costs, however, and selecting the best method for calculating these indirect costs, is not so easy.

The good news is that once a method has been chosen, technology can help constractorsyou better understand overhead allocation, and easily allocate these costs for a complete picture of your company’s financials and job costs. Today, many construction-specific accounting systems are able to help you track overhead, calculate its ratio against actual expenses, and report it in a way that’s understandable and accurate.