Contractors Need To Understand the Financials

Contractors Need to Know the Numbers

Some contractors think of Job Costing as a mystery. Some think of Job Costing as unnecessary paperwork. But any real contractor knows that in construction-if you don´t know your costs-, you are just rolling the dice. Things like rule of thumb bidding or “knowing what competitors are charging” is not good enough. Each company has different costs (rent, salaries, etc,-commonly known as “overhead”).
It´s a fact that without understanding the financials of construction it´s like sending your workers out in the field with only a hammer and measuring tape….and nothing else.

Most contractors came up from the field. They are experts at the construction but have little training in understanding how to operate a company by the numbers. Instead, they count on their accountant to see to that part of the business. But the truth is VERY FEW ACCOUNTANTS UNDERSTAND CONSTRUCTION ACCOUNTING and how it relates to bidding and job cost control.

Most contractors are brave entrepreneurs who are working in a field with perhaps the most need to understand how financial accounting ties in with daily operations. Projects come and go as does cash flow and there is great need to know the best way to match expenses with the income? How does one know when labor or materials cost are over budget? It´s like driving down the road with one eye covered! Typically, contractors don’t really know if a project has been profitable until months after completion.

Understanding the numbers for construction is not hard to understand and really adds significantly to the bottom lime as well as getting rid of the fear of working more or less in the dark. As a matter of fact, because of the ebb and flow of the cash, contractors may think they are making money when they are actually losing.

Not any more!!

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