What is your financial foundation?

What do we mean when we say your “financial foundation or base”? This is made up of your chart of accounts, cost codes and list items and needs to be set up in a way that makes sense for your business. When it is set up, you will be able to file your taxes correctly and also produce accurate financial reporting. This includes:

• Classes
• Customer lists
• Vendor Lists
• QuickBooks Online (QBO) functionality settings
• QBO bank connections
• Recurring transactions
• Custom reports

Importance of your foundation

Similar to building a house, you need a strong foundation for the long term stability of the structure. For your financials, you similarly need a base or foundation for all of the numbers to make sense and give a clear and accurate picture that decisions can be based on. This piece is so important and oftentimes is overlooked. If your foundation is not in place, you will likely have some of these issues:

• Unable to get accurate costs
• Don’t know how your money is being spent
• Inaccurate reports
• Difficulties integrating project management and financial software
• Unclear if you are making or losing money

Benefits when it is set right 

When your foundation has been set up properly, managing your business and making decisions will be much easier. You will have confidence in your financials and your reports will be clear, providing you the information on the “financial buckets” that you care about and also giving you the information to spot trends over time. The chart of accounts will provide the right buckets to categorize your transactions so you have a clear understanding and view of your company’s financial health. The cost codes will provide the detailed line items on your estimates, time and other construction costs. Streamlining your financial workflow with additional software integrations and automation will also save you time and headaches. All in all, your financial foundation is the base for your entire workflow and it just won’t work if it is not set up correctly…period!

Where to start?

Now you understand what your financial base consists of and the value of having it set up correctly, how do you make it happen? 24hr Bookkeeper has comprehensive experience with finance and accounting in the construction industry and knows what details you need and care about to operate your construction business. We know how it should work and can help you navigate, organize and put all of the pieces together in a way that makes sense for you — for now and for the future. Although we don’t know what 2021 might hold, we do know that accurate financials are a must for success. Now is the time to act to head into 2021 with a solid financial foundation!

The post Lay Your Financial Foundation appeared first on 24hr Bookkeeper.

Let’s start with the basics.

What is progress invoicing?

Good news! You are likely doing it already! Progress invoicing is simply the function of billing customers in increments of the full estimate throughout a project until its completion. For example, let’s say you are building a $400,000 house. Since it is very unlikely that you would bill the full amount at the beginning of the project, you need processes in place to get portions of the full $400,000 throughout the project. Having the right workflow in place will keep everything working smoothly.

Benefits of progress invoicing

So, how can having the right progress invoicing workflow in place benefit you?

• More Cash
  You will have positive cash flow. Project costs and overhead can be covered as the project progresses because you have the system in place to know how much money you have and can budget accordingly.
• Less Confusion and More Accountability
  Overall, there is less confusion. Less confusion for you and your customer on payment details, which can make for an better customer relationship. Not only does it allow you to hold your customer more accountable so they know when the payment request will happen, having it already planned out can help hold your company accountable to follow the schedule that you have set for your project.
• Budget Tracking
  You will be able to easily track invoices and also know when you will get paid. You will also see exactly how the project is tracking against the estimate and be able to adjust accordingly, if necessary.
• Tools
  There are tools in most software that make all of this happen, again with the right process in place! Find a software that offers the functionality to track progress invoicing, like QuickBooks Online.
• Happy Customers
  Your customers will not be shocked when they receive a bill since it has all been laid out for them already. It can also give them peace of mind that the job will be completed to satisfaction.
• Happy Vendors and Subcontractors
  Your vendors and subcontractors will be happy when they are being paid on time. Since they will know the expectations of the project, and you will have set terms up front, this will make working together smoother – at least from the accounting side.

Win, win, win!

Setting up progress invoicing

As we’ve already hit on, one of the most important things to do so that progress invoicing works for you is to establish and agree upon the billing details ahead of time, ideally when you are setting up the contract. That way everyone is clear what is expected and can plan accordingly. Be sure to include:

• Total amount of the contract
• When you will be invoicing
• How much you will be invoicing

When?

To determine when you will be invoicing may depend on your relationship with your client. Examples of choosing a time to invoice would be completion of certain phases of the job, monthly on a chosen day of the month, or a chosen time frame agreed upon by both parties. But remember, be confident in you setting your billing terms and do what works for your business, whether it’s Net 30, on the 5th of the month or when a discipline is completed.

How Much?

There are several options to consider when deciding how much of the total estimate to bill. This could be a percentage of the total estimate or a percentage of cost code lines from your estimate. You can even do a custom dollar amount of the total estimate. Another way to determine an amount to bill is to go to your project budget, add up all of the costs and work performed for the month, calculate your fee and charge that amount.

Again, the biggest key to making this work is to make sure you and your customer agree upon the details before the project begins and having the right workflow in place ahead of time.

It’s time to bill! Now what?

When it comes time to billing, QuickBooks has the functions to set up progress invoicing and works with your project management software, such as Co-Construct or BuilderTrend. It provides reporting and dashboards so you can easily track the status of the project. 24hr Bookkeeper has created a step-by-step video on how to do the function of progress invoicing in QuickBooks and has the expertise to take the functions and design a workflow that works for your situation. Find that video on our YouTube page.

At 24hr Bookkeeper, we are passionate about working with businesses like yours taking them to the next level. Getting workflows and processes in place that work for your company and utilizing your software will save you time, money and headaches. Our team knows the challenges you face as a construction business owner and can help solve your accounting and bookkeeping problems.

Find out more how our services can help take your business to the next level!

Contact us today for a no-cost consultation!

The post What Can a Progress Invoicing Workflow Do For You? appeared first on 24hr Bookkeeper.

This week, we’re covering information regarding the extension of the PPP loan program. Here’s the video transcript of Karine’s info broken down by category.

Transcript:

Gather Your Documents Associated With the PPP Forgiveness Application

Don’t Freak Out There Are Some Exemptions for Payroll Changes

Should I Wait to File My PPP or File Right Away?

Who Can Help Me File My PPP Forgiveness Application?

The post What You Need to Know For Your 24th Week of PPP appeared first on 24hr Bookkeeper.

While many of our contractors are navigating the PPP loan program, we wanted to make sure we had some information available on the Forgiveness Application. For those who like to skim and find the most relevant information to their needs, we also wanted to put out our video transcript. If you have additional questions that we didn’t answer yet, get in contact with us! We’re here to support the construction industry with any financial questions.

Transcript:

Hey there! It’s Karine Woodman with 24hr Bookkeeper. Today I’m going to talk about the PPP loan forgiveness application. I am going to do a basic overview of completing the three worksheets that are part of the application, one of them being the application. Keep in mind that there are changes coming in the pipeline, such as instead of an 8-week PPP period that is proposed, to change from 16 to 24 weeks. Also the 75/25 payroll versus non-payroll costs are proposed to switch to a 60/40 split. For the sake of this video, I’m going to do it as it sits today, and keep in mind that that application could change. I’m guessing that the majority of the information is going to remain the same. It’s just again the extension of the time will be different, in addition to the split. But you’ll still have those costs.

Step 1: Download the PPP Forgiveness Application

To get ready for this, the first thing you should do is download the application. You can just Google it. Just type in PPP loan forgiveness application. It’s an 11 page PDF that has the three sections. The application has three pieces that you should know about. There is the application itself, and I know you can see my screen. I’ve got them kind of all over.

There’s the Schedule A, and then the Schedule A worksheet. My recommendation is, the first thing you should do is you should work off the Schedule A Worksheet. Then do the Schedule A Form, and therefore complete the application.

Step 2: Gather Employee Information of Those You Paid During the 8-Week Period

There’s a few things that you’re gonna have to gather prior even being able to plug in the information. The main thing related to payroll would be all of your employees that worked during your PPP period. The last four digits of their social, their gross wages, and their average hours during that period. You will also need to have the employee’s average pay during… (There are three stated periods you can choose from to identify what their average pay.)

They’re going to ask that because they want to know if during the PPP period, basically the salary was reduced from what it was prior to the PPP timeframe. Any mortgage interests or loans basically related to mortgage or personal property, vehicles equipment, anything like that, those need to be in effect prior to February 15th on this application. Also lease payments, rent payments, and utilities. So utility is not just water, gas, and sewer. It also includes transportation. Which I interpret to be mileage, in addition to telephone and internet bills.

Step 3: Start With the Schedule A Worksheet

So, let’s start with the Schedule A Worksheet. The first thing it wants to do, and this is just giving you, if you have more employees and what would fit on this and this is for your calculation purposes. just open up a spreadsheet and create the same thing. Then add all of your employees on there, which will probably help calculate those totals. Basically Table 1 and Table 2 just allow you to enter your employee information, who they are what they got paid, if they’re full-time or not full-time equivalent, and basically if they have any reduction in hours. The first thing you need to know is for all employees that reside in the United States. You cannot include any owners on either of this calculation.

Step 4: Separate Your Employees into Those Who Make Less Than/More Than $100,000 and Full Time/Part Time

Table 1 is for anyone that has been paid less than $100,000 in 2019 or any employees that have not been paid in 2019. So anyone that’s new. In Table 2, it wants you to add the employees that were paid more than $100,000 in the 2019 period. Basically it separates in that hundred thousand dollar line between the two employee types. What you want to do is an employee name go ahead and put that in put the last four digits of their identify employee social security number.

Cash compensation includes gross wages, sick pay family, sick leave, any severance packages, and again the instructions, which is part of the original 11 pages, has this detail but again I’m just giving you a basic overview. The average full-time equivalent: iff you have an employee that works 40 hours a week that is considered an equivalent of 1. If that employee works 45 hours, you cannot go over 1 so 1 is the max. If you have any employee that works less than that, you can use a basic calculation that allows you to put a .5. So two .5’s equal 1.

The reason they’re asking for the full-time equivalent is they want to make sure that you started with the same amount of employee full-time equivalents that you ended with in the PPP period. Now there are going to be some cases where an employee was fired. They might have quit. You do have the option to have an exemption for that, but in this case they want you to go ahead, and and just put in that they are full time. If they work 35 hours a week you can take that 35/40, whatever that amount gives you round it to the nearest tenth, and you can also put that there. Or you can use a .5 if it’s under 40. The salary hourly wage reduction: I’m going to just explain this on, hopefully what sounds like a basic scale.

You cannot have reduced anyone’s wages more than 25% of their average wage at your reporting. If the average wage was a thousand dollars, and now they received seven hundred dollars per week, that’s actually more than 25 percent. Because 25 percent would have allowed them to make $750. Because there is a $50 difference from the 25 percent to what they actually got paid, that’s what you would put in this box right here, times the 8 weeks. It would be four hundred dollars. Again, if you are within 25 percent of a reduction in in wage, you do not have to put it here. This is anything over 25 percent. So, you’re going to fill all this out. You’re going to put your totals in here. Then we’re going to use that in the Schedule A Form. Down here, it’s asking for the numbers I had mentioned to gather. Your full-time equivalents, you can put your your numbers based on filling out these, step one through step five.

Step 5: Plug Your Number Totals into Schedule A

Once you’ve completed this, then you can basically plug in those numbers, the totals, into the Schedule A. If you look here, this goes box one, box two, box three, box four, box five. Line one through line five is all coming from the schedule A Worksheet. Now everything I’m telling, you remember it’s it’s a little bit more depth, but I’m just giving you a basic overview on completing the application.

Step 6: Enter In Any Health Coverage Information, Retirement, & Local Taxes

For line six, it’s asking for you to state your employee health insurance coverage or benefits paid by the employer. Do not include any employee paid contributions. You would go ahead and total that over the period. I should have mentioned this at the beginning, but there’s actually two periods that are accounted for in here. There’s the covered period, which is the first day of funding, basically the day you receive the money and it’s 56 days from there, or there is the alternative payroll covered period. If you ran a payroll that was after the day you got funded, you are allowed to use the first day of the pay period after you were funded as the first day of your 56 days. As long as everything falls on the right rotation, you would be able to include
that into your application for forgiveness. It does state that it wants you to in the application notify which period it is, and actually give you the dates for both. When you’re accounting for cost, they understand that it falls into the right period based on what it is. The alternative payroll would only be for, likely, payroll related costs.

A Note On Owner Income: Okay, so, I should have mentioned that at first, but it is here now. Right here, you have contributions to employee retirement plans. Again, this is employer portion, not employee portion. Then any state and local taxes, so unemployment would be that. If there’s any city or local tax related to employee wages, you could include that here because that would be paid strictly by the employer. In line nine, it does want you to include any amounts paid to partners or self-employed or general owners. The owner, still follows the same rule of the hundred thousand. Whether you’re an owner or you’re an employee you cannot make more than the $15,385. I believe it is which is at a hundred thousand dollar salary.

So if you were an owner, and you paid yourself fifty thousand in the eight-week period because for whatever reason you did, you would only be able to claim the 15,385 per owner because of the hundred thousand dollar rule. They came up with the hundred thousand dollar calculation for owners to say you take a hundred thousand divide that by 52 weeks times eight weeks equals that $15,385.

Line ten, you know just follow the calculation. Equivalency reduction calculation, if you have not made any reductions then you are not going to have to worry about any of this information.

Step 7: Gather Your Original PPP Loan Application Information

Okay, the last piece is the application itself. You need to have your PPP loan number, your disbursement date, your loan amount, how many employees you had at time of application, and so on. That’s pretty self-explanatory. Keep in mind that the frequency when I talked about the covered period or the alternative payroll covered period, you have to be on a biweekly or a weekly schedule to be able to use that period. Even if you’re twice a month, which I think that those people are not going to get that potentially good side of the stick, they do not unfortunately have the option to use the alternative payroll period.

The rest here as you can see, you’re going to go ahead and just enter your payroll costs, but you’re going to get it from your Schedule A.  On your non-payroll costs: any interest on, again, personal or real estate property, any rent, or lease payments, and any utility, which also includes transportation, telephone, and internet. All of this has to be in place prior to February 15th, and you’re going to have to show documents that all of that was the case in your forgiveness application.

Then you’re going to, again, take the information that you got from Schedule A, enter that related to FTE’s, and it’s asking for a calculation to make sure that the payroll costs are in the seventy five percent split. Which again, this might change. That’s a basic overview of the application. There will be more to come. So we will go ahead, and get an updated video when that time
comes. Thanks for watching!

If you need assistance reviewing your current financials, contact us today! We’re here to help, and we offer a free financial analysis that you can use to your advantage!

The post How to Fill Out The PPP Forgiveness Application appeared first on 24hr Bookkeeper.

That being said, for construction companies, accounting is instrumental to their success. Properly managing their money and ensuring that each job is profitable is crucial for the long-term growth of a construction business.

But, mistakes with bookkeeping are common, and it doesn’t take long before they start to pile up, especially when you’re trying to focus on two things at once (delivering good projects for your clients and maintaining clean accounting).

In fact, it’s after a few of these mistakes occur that construction business owners realize that outsourcing their bookkeeping may be the way to go.

Check out the infographic below to see 5 mistakes that you’ll make with your accounting before you realize outsourcing is the way to go.

How 24hr Bookkeeper Can Save You From These Common (And Costly) Mistakes

Here at 24hr Bookkeeper, we understand that managing a construction business is a lot of work. But hey, you wouldn’t have gotten into the business if you didn’t think you could handle it.

That being said, wouldn’t it be nice if you could maintain the quality of your services—and even possibly improve them—by outsourcing your construction accounting? That’s where we come in.

We offer a wide range of services that are all aimed at helping take the stress of bookkeeping off of your plate so that you can focus on delivering results for your clients. But don’t worry, we’re experienced and professional bookkeepers who know our way around organizing and maintaining the books. You don’t have to worry about those mistakes we just listed anymore.

Our services include the following:

Construction Software Integration with QuickBooks

We’ll integrate QuickBooks and your construction software to produce a more streamlined workflow. Everything from project management, to estimating, to bookkeeping will be simplified.

Catch Up Bookkeeping

Have your financials run a little behind? No worries! We’ll bring your bookkeeping up-to-date to ensure it reflects accurate and verified financial data. Gain confidence back in your financial reports.

Workflow Advisory Services

Having issues creating an established and effective workflow? We’ll work with you to create a step-by-step financial manual that will breakdown financial management and workflows. This includes individual employee responsibilities and how to utilize QuickBooks and your construction management software properly.

Monthly Bookkeeping

Say goodbye to all those tedious and time-consuming bookkeeping tasks by outsourcing your monthly bookkeeping to 24hr Bookkeeper today! We’ll handle accounts payable and receivable, payroll, and everything else when it comes to your finances in both QuickBooks and your construction software.

QuickBooks Training

For us, QuickBooks is second nature. But if you’re new to this accounting software, it can be a little complicated to become familiar with it. That’s why we offer in-depth QuickBooks training. Learn to use, understand, and confidently navigate QuickBooks Online with one-on-one or group training with us today.

To get in touch with us, simply fill out this brief form or call us at 218-885-3100.

We’re looking forward to hearing from you!

The post Infographic – 5 Accounting Mistakes You’ll Make Before Finally Realizing You Need to Outsource it appeared first on 24hr Bookkeeper.