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The Business of Building a ‘Building Business’ — Part 2

Every builder needs to hire a bookkeeper

Posted on Dec 28 2011 by Michael Strong, LEED Associate, CGP

In my last blog, I recommended that we builders should try to build our office team much like we build our construction team. We should move as quickly as possible from doing all the work ourselves to hiring specialty employees and professional partners. (In the field we call them trade contractors).

The benefits of doing this include:

  • Greater specialization will lead to a higher quality of work, since no one individual is great at selling, estimating, website design, bookkeeping, legal work, and insurance administration.
  • Having professional partners doing some of the administrative work gives us greater flexibility and cost savings in adjusting our staff size when business is slow.
  • Having employees and professional partners doing administrative work instead of doing all of it ourselves enables us to accomplish a higher quantity of work.

First, hire a bookkeeper

I recommend that the first office chore that you outsource to a specialized employee or professional service is bookkeeping. Why? Because managing your money is the foundation of everything else you do. No matter how good you are at estimating, sales, marketing, or construction cost control, if you do not know how to manage your costs and profits, you will not enjoy the financial security your company needs to weather the ups and downs of this crazy industry.

Once you have the tools in place to manage the financial aspects of your business, you can lay out a road map for securing the other important administrative specialists on your team. Note: putting bookkeeping ahead of others does not preclude you from hiring other specialists simultaneously; it is only recommended.

Unless you have a particular talent, need, preference, or relationship with a given professional affecting who you hire first, I believe you should start with addressing your accounting needs first.

Check the qualifications of any job applicants

Knowing what qualifications your bookkeeper should have and what role he or she should play in your organization is critical. A bookkeeper should be certified in the use of QuickBooks, or should be able to pass a QuickBooks exam. Moreover, a bookkeeper should be interviewed or recommended by your accountant, and should be able to pass a basic accounting exam. A candidate with experience in residential construction will have greater familiarity with your books than one who has a background in another industry, so that should be given due consideration.

This professional can be a part-time or full-time employee, depending on the volume of work you have. In some cases you may be able to work out a creative arrangement with a professional bookkeeper to whom you can subcontract the work. Be cautious of this arrangement, however, as you, your estimators, superintendents, and office staff will all need lots of “face time” with your bookkeeper. Thus, make sure they have a physical presence in your office at least a couple of times a week.

Meet with your bookkeeper regularly

As the owner, you should sit down with your bookkeeper and accountant at least quarterly to review the agreed-upon financial reports. You should have formal meetings with your bookkeeper alone at least weekly.

Once you have a rhythm, including timely reporting of your job costs, profitability, debt analysis, and cash flow forecasting, look at the balance of your administrative needs to determine the office duties that should hire out next. Whether these duties involve design, estimating, sales, or marketing will be determined by what you can afford, what you need, and what you no longer want to do yourself.


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  1. Michael Strong
1.
Sat, 12/31/2011 - 18:19

Bookkeeper that understands construction better choice
by Norman Zboray

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Great post on hiring a bookkeeper but we learned the hard way of hiring an individual that did not have any experience in construction and building. Another suggestion would be to consult an individual that understands your state's tax codes before you start in business. These steps seem simple but you must set up your administrative processes before you can even think about a building project.


2.
Mon, 01/02/2012 - 16:10

Separation of Duties
by John Zito

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I was an accountant primarily for clients in the construction industry in the 80's. One of the biggest issues was the owner giving too much control to the bookkeeper. On three different occasions, I was engaged by small business owners to find where money was being lost--unfortunately, it was too late. In all cases, it was the result of fraud by the bookkeeper. All were "trusted employees", which is not enough. Here's a link to a short article that should get help give food for thought:

http://smallbusiness.chron.com/explain-separation-duty-important-account...

Most bookkeepers will be honest, but the controls are important and will provide for a better system. Your accountant should be able to help set up the controls.


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