Purpose of Accounting and Financial Management For Contractors

Financial Management For Contractors

A fundamental goal of any growing business is to maximize and protect the profits. By understanding the profit process - that is how to define it, create it, and measure it - a business owner or manager will come to better understand how fragile profits can be and the importance financial management plays in protecting it. For many Remodelers first getting into the business, myself included, financial management skills were not necessarily part of our educational background. However, our lack of knowledge on the subject would be a weak excuse to give our family for not being financially successful.

Try This Self Quiz To See If A Properly Setup Financial System Can Help You

Profitability is ultimately the responsibility of the business owner

Accounting For Contractors There is way too much to learn about accounting and financing to cover or explain in this short blog article. I suppose that is why it is actually a career for some people. That’s why there are accountants, business consultants and financial advisors. For a business owner though, understanding and overseeing the process are the bare minimums. The ultimate success and profitability of your company is typically not left to someone else; it’s the owner’s responsibility. In order to identify what business owners need to do, I find have found it helpful to show my consulting and coaching clients a path for how it should happen.

A simple path could be as follows

Make a plan for what you want to do and how you expect to do it.
Create a realistic budget for your plan so you will know what it will cost in total and how it breaks down into direct costs, indirect costs and profit.
Determine the markup percentage to add to your estimated costs, and what gross profit margin that represents so you will know if you’re on track as you complete projects.
Estimate your projects using qualified information for pricing assumptions, and then do job costing to track your actual results.
Use financial reports to monitor your actual gross margin, overhead costs and profitability.
Take advantage of the information you collect to make changes to your plan and or to create your next plan.

Is your accountant a historian?

With much to be learned, be sure you find the right accountant to partner with. Do you want a historian who will collect your information and report to the government what happened while you were working? Or, do you want a proactive partner helping you to create and protect your profits? I tell my clients to seek referrals for someone who can answer their many questions and perhaps helps them create and understand the accounting reports needed to track business performance.