FinTruction

Your estimator pulls a cost database, drops in the takeoff, applies the suggested unit costs, and produces a bid in 45 minutes. The number looks professional. The unit costs came from a database that doesn’t know your supplier, what your crew installed in a day on the last three kitchens, or which sub came in $4,000 over on the cabinet install.

Your books already have all of that. Closeout numbers from your last five comparable jobs show materials cost by category, hours the crew logged by scope element, and what subs billed for each trade. The data is sitting in QBO with nobody pulling it.

Averages have a source problem. RSMeans and the regional cost databases are built on samples that have nothing to do with your suppliers, your crew, your subs, or your local market. Useful for a sanity check on a scope you’ve never bid, not for the recurring work where you have your own history.

A bid built on your own data competes on accurate terms. You walk away from work that won’t be profitable at your real costs, and you win work the average bidder either overpriced or underpriced into a loss.

THE FIX:
Pull job cost reports on your last five jobs of each recurring scope: kitchen remodels, bathroom remodels, additions, whatever you bid often. Build a unit-cost library from them, with line items like cost per linear foot of cabinet, cost per square foot of tile, or average sub cost for electrical on a kitchen scope. The data is in QBO already, but it needs to be extracted into a format your estimator can use.

Update the library annually, or after major changes in suppliers or sub pricing. Two-year-old numbers are no better than a database.

Lead with your unit-cost library on every bid. Use industry databases only for scopes where you don’t have your own history yet.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your

A $12,000 fixture order ships from an out-of-state supplier. No sales tax appears on the invoice, and your bookkeeper records the $12,000 as material cost.

Most US states require buyers to self-report and pay use tax when taxable property is bought from out of state without sales tax paid. Five states (NH, OR, MT, AK, DE) have no general sales tax. Since the 2018 Wayfair ruling, most out-of-state sellers above state thresholds collect the buyer’s tax, so this scenario is less common than it used to be, though it still happens.

For construction contractors, most states treat the contractor as the consumer of materials installed into real property, so use tax is owed when sales tax wasn’t paid. Hawaii, Mississippi, and New Mexico are exceptions.

The audit window depends on whether a return was filed. On a filed return, the statute is typically three to four years, but unfiled returns stay open much longer. California is eight years, several states keep the window open indefinitely, and unreported transactions can stay on the table far past the filed-return statute.

Use tax rules vary sharply by state on rates, return mechanism, contractor treatment, exemptions, and audit timing. A SALT specialist or your CPA should walk through what applies to your purchases.

THE FIX:
Identify out-of-state purchases from the last twelve months with no sales tax on the invoice.

Confirm whether your state requires use tax, at what rate, and whether contractor-as-consumer treatment applies.

File the appropriate returns with a SALT specialist or your CPA. Many states have voluntary disclosure programs that reduce penalties when you self-report first.

Going forward, any out-of-state purchase without sales tax gets flagged for use tax review before month-end close.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

Your $86,000 skid steer was financed over 60 months with a $1 buyout at the end. Your bookkeeper coded every payment as Lease Expense, but a $1 buyout makes this a financed purchase, not a rental.

How this gets recorded depends on your accounting basis. Most contractors are on tax basis or modified cash, where the equipment is a fixed asset and the financed amount is a note payable. The monthly payment splits between principal reduction and interest expense.

If your books run on GAAP, ASC 842 calls this a finance lease. The substance is the same, but the labels change. The equipment is a right-of-use asset, the financed amount is a lease liability, and the payment splits the same way.

Either way, the current treatment puts the whole payment on the P&L. Neither the asset nor the liability shows up on the balance sheet, so your equity, your debt-to-income, and your asset list for insurance and disposition are all wrong.

One nuance: if your accountant elects Section 179 or bonus depreciation on the capitalized asset, your year-one tax deduction can match what you got from expensing the lease. The balance sheet damage stands regardless.

THE FIX:
Reclassify the equipment. The asset gets capitalized at $86,000, and the financed balance becomes a note payable, or a lease liability under GAAP. Your accountant books the entries dated to when the equipment was placed in service.

Every payment going forward splits between principal and interest. The lender’s amortization schedule has both numbers.

If the equipment was placed in service in a filed year, the correction restates prior-year depreciation and expense. Your accountant decides whether to amend the return or post to the current year, and whether to elect Section 179 or bonus depreciation on the capitalized asset.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your s

A $26,000 ACH from your client lands in your account in February. Your bookkeeper records it, your AR clears the invoice, and a job that was 60 days late looks paid.

Under NACHA rules, an ACH credit can be returned for insufficient funds within two banking days of settlement. Your client’s bank flagged it, your bank reversed the deposit, and the $26,000 came back out within the week.

Nobody on your side saw the reversal. No alerts were set up and nobody was pulling the bank feed daily. The reversal surfaced at month-end reconciliation, by which point the original deposit had been recorded, the reversal had hit, and the AR was cleared.

Your books still say the invoice is paid, your AR aging doesn’t show this client, and your collections process never triggers. Your client knows their ACH bounced because their bank told them. They also know nobody on your side has reached out.

Two months later you catch the return on a reconciliation. By then the receivable is 90+ days old, the client has gone quiet, and the conversation is harder than at 48 hours.

THE FIX:
Log into your bank’s portal and turn on every alert for ACH returns, NSF reversals, and deposit chargebacks. Most banks let you set email and text alerts. Turn them on for any reversal, not just over a threshold. A small return matters as much as a big one.

Sync your bank feed daily, not weekly. Your bookkeeper should pull and review new transactions every business day. Returns surface in the feed within a day or two of the reversal.

When a return fires, treat it like a payment that never arrived. Reverse the entry, restore the AR, and contact the client within 48 hours about reissuing or paying another way.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

15 hours of overtime every week, last month. At time-and-a-half on a $54 base, that’s $1,215 a week, $4,860 a month, $58,320 a year. The instinct is to look at that and hire.

But the $58,320 isn’t the cost of choosing overtime over hiring. Most of it is base wages your crew would earn either way. The real premium for using overtime is the 0.5x extra above the base rate. On 15 hours a week at $54 base, that’s $405 a week, $19,440 a year using the 48-week convention.

A new hire isn’t just covering those 15 hours. They work 40 hours a week at full base wages plus a labor burden that runs anywhere from 25 to 50 percent depending on trade and state. Comp, payroll taxes, GL, insurance, gear, training, and idle time all stack into it. Roofing, framing, and demolition crews carry the most because of comp class. All-in, a $54-an-hour hire usually lands around $140,000 to $170,000 a year fully loaded.

The math turns on one question. Can you keep that person busy 40 hours a week? If yes, hiring wins because you get 25 extra productive hours filled with billable work, well past the $19,440 premium you’d save. If the only steady extra demand is the 15 hours, overtime is cheaper.

You answer that by looking at your pipeline, not by feel.

THE FIX:
Pull OT hours from the last three months. Split them between recurring demand and one-off pushes. Recurring is what a new hire could absorb. One-offs aren’t a reason to add headcount.

Look at the next 90 days of committed work. If you have a steady 35 to 40 hours a week the new person could do, hiring probably beats continuing OT. If demand drops after the current backlog, overtime is the flexible option.

If you do hire, update your labor burden and overhead rate before the first paycheck. Your estimator needs both reset for the next bid.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one & it tells you exactly where your books are exposed.

Comment “BOOKS” & we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specif

$60,000 hit your bank account. Equipment loan from the dealer’s bank. Your bookkeeper coded it as revenue with a single entry.

But you didn’t earn $60,000. You borrowed it. Loan proceeds belong on the balance sheet as a credit to Notes Payable, not on the P&L. Coding it as revenue starts two separate problems that run independently and don’t cancel each other out.

The first problem is this year’s tax bill. Your P&L shows $60,000 in income that doesn’t exist. Profit is overstated by the full amount, and that carries into your tax return. You’re paying tax on money you borrowed.

The second problem is the balance sheet. Because the loan never went to Notes Payable, your books don’t show you owe the money. Liabilities are understated by $60,000, equity is overstated by the same amount, and your business looks more solvent than it is.

When payments start, they often get miscoded too. The full payment hits as an expense instead of being split between principal and interest. That keeps both errors alive. Every year of the loan, the P&L is wrong and the balance sheet still doesn’t show a debt that exists. The reports aren’t reliable for a tax return, a bank covenant, or a decision about the business.

THE FIX:
Reclassify the $60,000 from revenue to Notes Payable as of the date the loan funded. That’s the correcting journal entry your accountant will book.

Then fix every payment that hit since. Each one splits between principal, which reduces Notes Payable, and interest, which is the actual P&L expense. The lender’s amortization schedule has both.

If the miscoding happened in a year that’s already been filed, the correction restates prior-year income. Your accountant decides whether to amend the return or post to the current year.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

Tax time. Your accountant prepares last year’s return and makes adjusting entries to close out the year. Depreciation, reclassifications, accruals for costs that hit the period but weren’t invoiced yet. Those entries set the final ending balances for last year.

The problem is those entries stay in your accountant’s software, made to file the return. Unless someone enters the same adjustments into QuickBooks, your books never get them. Your bookkeeper kept coding into the new year off the old, pre-adjustment numbers.

So this year opened wrong. Retained earnings, fixed assets, accumulated depreciation, loan balances. All carried forward from where the books sat before your accountant touched them.

What should happen is simple. This year’s opening balances match last year’s adjusted ending balances. The number your accountant signed off on is where your books start. When the adjustments don’t carry forward, that link breaks on day one and every report this year sits on a foundation that’s already off.

Whether those balances even appear on your filed return depends on your entity type and method. Some returns carry a balance sheet, some don’t. Either way the adjusting entries still have to land in QuickBooks, or your books drift from the work your accountant already finished.

THE FIX:
After the return is filed, ask your accountant for the year-end adjusting journal entries. The actual entries, accounts and amounts.

Get them entered in QuickBooks dated to the last day of the prior year. Then confirm this year’s opening balances match the adjusted ending balances.

Do it every year as part of closing the books. If the entries never went in, it’s not too late, but enter them before the gap compounds.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.