Stepping into the world of accounting for construction means going beyond the basics of banking, accounts payable, accounts receivable, and payroll transactions. It means diving into a whole new world of information.
Many small construction businesses can manage just fine for quite a while without needing to track retention, job costing, change orders, progress billings, customer deposits and other construction-specific information.
But, at some point any construction company that wants to grow will likely wish to obtain a line of credit, conventional lending, and/or bonding. They will run into a brick wall if they do not have the proper data in the system. They must also have a way to pull the proper reporting from their accounting software.
Construction companies with savvy advisors can be prepared ahead of time. A good construction company advisor can help them get the proper systems into place to track these things prior to the immediate need for these reports at the bank or bonding office.
Not only that, but having good job cost data to review regularly can be extremely helpful for any construction company management team.
Have you ever felt stuck when trying to explain your value to a potential client? Do your current or potential clients often treat you, your firm, or your team as a commodity? Just someone on whom they can dump receipts and get back a ‘clean’ file for the tax preparer?
The more that your firm does advisory work and sees excellent results from that work, the more you can accurately explain the value of your exceptional advisory services. Meaning, you will be better able to give potential clients assurance of the value concerning your pricing structure. As your value rises, so do your charges.
Take, for example, the outstanding results that our firm has had from helping clients begin to think through cash flow management in their businesses. By helping business owners clearly see where cash flows in and out of their business and then tying it back to how they budget, estimate, bid, invoice, collect, pay vendors, etc., we consistently find outstanding results in those “aha” moments.
Sometimes those moments are not so pretty. Quite recently, a client described the feeling as “gut-shot.” Once he made it past that initial shock, though, he was all in as we described better business practices and scalable, repeatable processes he could build into his business increasing efficiency and establishing better costing, budgeting, and bidding habits.
Another of our clients described themselves as “reluctant to grow” when we began working with them several years ago. Only a year or so into our engagement with them, they made the big business decision to move forward and create an entirely new business division in order to diversify their streams of income. They were able to make that decision based on our work to help them streamline processes and show them cash flow in a way that was meaningful to the owners. That momentous decision is one of the reasons they were able to ride through the COVID-19 shutdowns with only a slight pause in business because their new division was considered as an ‘essential business’ during the statewide lockdowns in their state.
Sharing those success stories in your calls with potential clients will set your firm ahead of the competition. Not just that, but the more you and your team are involved in the industry, the more you will “walk the walk and talk the talk.” You’ll know what problems your construction clients face and you’ll have developed proven methods to solve for those issues.
How to Learn More
Construction accounting and advisory is not for every firm. The great thing about finding a niche is finding one that best suits your firm’s skills and passion.
If you and your team enjoy digging into some deeper accounting puzzles, organizing and sorting accounting information by projects, and analyzing data broken down by project, then this may be a perfect niche for you to pursue.
The first thing to think about is what area of construction you will serve. While there are similarities across this giant industry, home remodelers require quite a few different services and reports than do commercial new construction plumbers, for example.
As with any other new business idea that you would like to pursue, the first thing to do is to do some research. Seek out others who serve in the niche who are willing to share with you. You can find them by searching for Facebook groups dedicated specifically to construction accounting, seeking them out at conferences (attend sessions specific to the niche and stick around to talk to the speaker and other attendees), and looking for particular mastermind groups in this vertical. If you happen to be a member of a local Woodard group or the Woodard Alliance, ask the other members for referrals to folks they know that serve this niche.