Turns out our teachers were right: We really do use math in the real world. And in remodeling, math can get complicated.
We’re not just talking about adding and subtracting fractions. It’s job-costing, margins, depreciation, labor burden, payroll, percentage of completion, cash flow, taxes ...
Forget the calculator. Where’s the magic wand?
If you’re anything like Scott Starley, owner of Salt Lake City–based Progressive Remodelers, you’re admittedly “not a numbers person,” and that’s OK. Professional accountants and smart bookkeepers are at the ready, armed with software and experience to help put the decimal points in the right places.
Even if you know your numbers inside and out, building a relationship with an accountant can alleviate the stress that comes with finance-related business questions.
“Two heads are always better than one, and I really like having someone in the office,” Starley says of on-staff bookkeeper Bob Cole whose background drew Starley’s attention.
“I had used just a bookkeeper in the past, but I found it was very limiting on what that person could contribute to the overall wellness of the company,” he says. “Because Bob has a degree in accounting, he brings more to the table, like strategy and money management.”
Day-to-day, Starley has Cole focus on bookkeeping tasks, such as job-costing, and has an accounting firm handle his taxes. While the smallest companies may employ only a bookkeeper, business owners should consider each position’s scope of work. In some cases, accountants can do both jobs, but bookkeepers rarely handle complete financial oversight.
“Like most of us, my business started small. There wasn’t a need or income to cover the expense of an accountant at first,” says Rick Hjelm, president of Phase II General Contractors, in Lakewood, Wash. “As my business grew, the financials got complicated.”
Having worked with three different accountants over time, Hjelm says that personal rapport is important and that finding someone who understands remodeling is essential.
John Sperath agrees, saying remodelers need a financial education as well. “Before I started my current business, I never knew how to read a P&L. I had another company that succeeded by accident. That might be OK for a single-truck handyman, but when you reach a certain level of professionalism, you need to know your numbers,” says the owner of Blue Ribbon Construction, in Raleigh, N.C. “If your accountant can’t help you learn, find someone else.”
Sperath works with Debbie Combos, president of Accounting, Etc., in Cary, N.C. Combos parlayed her experience in cost accounting for a national home builder into a successful business niche. “Besides tax accounting, builders and remodelers often need a lot more services, such as project costing,” she says. Accountants familiar with remodeling will know how S-Corp and LLC tax returns relate to personal returns and can identify finished jobs and those that will carry forward to the next tax year. “These are important considerations that a bookkeeper might not know how to do,” she points out.
Colleagues and association chapters can point remodelers to affordable, trustworthy accountants. “Debbie worked with several of my peers and word got out that she was a good accountant,” Sperath says. “If you’re a member of NARI or NAHB, or have a trusted peer, that’s a great resource.”
Michael Sauri, president of TriVista USA, in Arlington, Va., chooses a different approach for his financial team. “As long as he understands our tax and business situations, I don’t feel I need an accountant who knows remodeling,” Sauri says.
Instead, Sauri hired a bookkeeper who works only with remodelers. Her experience lets her effectively communicate her clients’ numbers to accountants come tax time. “I need my bookkeeper to help me run the business,” Sauri says. “I need my accountant to help me with tax prep and planning.”
For both positions, Sauri prizes honesty and candor. “These people need to force you to look with vigilance, precision, and consistency at where you really are financially,” he says. “Not where you think you are.”
Hjelm agrees. “An accountant will keep you from doing dumb things,” he says. “It’s as if your mom is watching over your shoulder and gives you a quick reprimand or a needed course correction. It comes from a place of respect and sincere concern because they want you to succeed.”
Speaking of tough love, Sauri says that remodelers who enlist their spouse to handle the books may want to reconsider. “There are a lot of companies where the husband has the toolbags and the wife takes on the bookkeeper role by default,” he says. “Turning to someone who isn’t your spouse and who can look at the numbers in black and white, bonk you over the head and ask you, ‘What are you thinking?’ could be a big help. The fact that my wife doesn’t have to do that takes a lot of grief off of our marriage.”
In all seriousness, working with unbiased professionals can benefit any small-business owner. Hjelm knows he’s good at remodeling and working with people and that his accountant is good at managing financials. “To keep a constant watch on either responsibility requires a lot of time,” Hjelm says. “I can’t do it all and do it all well. I had to learn to trust that relationship, let go of the financials, and only deal with what I need on a day-to-day basis.”
For more on break-even see “Determining Your Break-Even Point,” by Leslie Shiner, THE JOURNAL OF LIGHT CONSTRUCTION, Apr/06, and “Strategic Budgeting and Your Break-Even Volume,” by Joe Stoddard, JLC, Aug/10. Both articles are available in the JLC Archive.