Q: I’m just getting started, and I’d like to know how much I’ve made for each project. I’m not very familiar with accounting, and I’m trying to decide which software to buy. Will QuickBooks do the trick, or do I need to find a “beefier” accounting program?
A: All versions of QuickBooks Pro and higher (including the QuickBooks Premier Contractor Editions) are specifically designed to record and report on income as well as costs related to the jobs you perform. QuickBooks is actually a very powerful and flexible program, and successful accounting, in my experience, is less about the software you choose than learning how to effectively use the tool.
If you’re just getting started, here are a few pointers:
As in construction, the first big secret to a successful outcome is a good underlying design for the foundation and framing! In QuickBooks, your foundation is the “Chart of Accounts.” Your framing consists of the various “Lists” that connect back to the chart of accounts (e.g., item list, customer:job list, vendor list, payroll items list, employee list, terms list, etc.). As in construction, there are a lot of ways that you could put the basic structure together, but only a few will give you the desired results!
Before you start setting up lists and making entries into a QuickBooks file, plan to spend some time learning about accounting basics, special construction accounting requirements, and QuickBooks features. Alternatively, find someone who has experience in these three areas to help you establish an intelligent structure that will produce the results that you’re looking for.
Take control of your daily financial information. Even if someone else will be handling your day-to-day entries, learn how to make basic entries into your QuickBooks file and how to run basic reports to see how those entries show up.
By taking this “learning-curve bull” by the horns now, before it gets big and mean, you’ll gain power and control over your business. Even if it doesn’t come easily to you, don’t delegate this primary responsibility away. You don’t want to be at the mercy of someone else (e.g., bookkeeper or accountant) to provide you with day-to-day financial data that is critical to running the financial side of your business.
Review and use your results to run your business. If set up and used properly, QuickBooks can provide you with a huge amount of information. But it’s up to you to use it.
Review estimated vs. actual detailed job cost reports on a weekly or biweekly basis. Check your year-to-date company profitability against your budget on a monthly basis. Touch base with your balance sheet to see that it makes sense. Then, if numbers aren’t turning out as planned, follow up to see why, and make your course corrections as warranted.
Use your experience plus financial information to create a more profitable business!