With spring around the corner, you might start getting busier and while you want to keep up with your financials, you just might not be able to find the time. But you don’t want to repeat the mistakes of the last few years, so you ask “What’s really important to keep track of?” The perfect answer, of course, is “everything.” But let’s get down to the basics. What are the things that, if you ignore them, can bite you later on? What–at the minimum–should you be doing and monitoring? Here’s a checklist to make sure you stay on track.

  1. Record costs on an accrual basis. That is, enter bills and credit card charges as soon as they come in, so you know what’s coming up for you to pay. If you wait until you’re ready to pay, you may find a nasty surprise when you finally dig into that stack of unopened envelopes.
  2. Enter invoices according to the payment schedule (for contract price work) or according to a pre-determined schedule (for time and materials work). Invoice early and often. Oddly enough, many contractors worry more about paying their subs promptly than they do about making sure that they are funding jobs using the customer’s money. Remember, working doesn’t make you money;invoicing makes you money.
  3. Monitor your cash flow. An easy way to do this is through the often-ignoredbalance sheet. If you’ve been entering bills and invoices, check out both yourtotal current assets and your total current liabilities. Divide the asset figure by the liability figure. If the result is 1.25 or higher, you’re in pretty good shape. Current assets are comprised of cash or things (like accounts receivable) that can be converted into cash quickly, and current liabilities are comprised of short-term debt like accounts payable, sales tax payable, credit card debt, and payroll liabilities. Seeing how many dollars you can get your hands on quickly to cover the upcoming bills lets you know if you’re going to be able to pay. Incidentally, in AccountantSpeak, this figure is called your current ratio.
  4. Track your job costs and review how the job is going while the job is in progress. It’s valuable to perform a job autopsy after the job is complete, but by then it’s too late for an intervention. If you see costs going over on a contract price job, the first step would be to confirm that your crew aren’t performing “extra” work that somehow escaped being recorded as a change order. Focus on change orders to bill for extra work as quickly as possible.
  5. Reconcile your bank accounts and credit cards. Unless you match your financial balances to what the bank has, it’s possible to miss automatic debits, charges, or even activity that was erroneously charged to your account.
  6. Track your backlog. Just because you are busy today doesn’t mean you’ll be busy tomorrow. Make sure your sales pipeline is active so that as jobs wind down, new work can start right away.

If you keep up with these activities, you should always know what you have for cash resources and how your jobs are going. These are your core necessities.

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