Let's Get Organized - Accounts Payable

Accounts Payable aka Vendor Bills

1. When bills come in the mail, code them with the job and code (roofing, siding, etc) and enter them daily into your accounting software as an accounts payable bill.
2. File them in an A-Z accordion folder that is labeled "Accounts Payable or Bills to Pay".
3. Twice a month (weekly or monthly) when it's time to pay bills, print an open payables report to choose what you want to pay, pull the bills from your blue accordion folder and select the bills in your software to be printed.
4. Print checks using three part checks (body, stub, stub or similar). After checks are printed, use window envelopes to mail the checks to the vendor.
5. Staple the bottom stub from each check you printed to the group of bills they are paying.
6. File each vendors paid bills (with check stub attached) in the appropriate "paid bill file folder" (see below).

This may be contrary to what many contractors want to do, but something I highly recommend. Job reports can be printed for the job file showing all job costs including paid and unpaid bills and more. By stapling all bills together with the check stub, they are all in one place and you can always go to the same location to find them. Waivers if printed with the bills can be filed in the job folder, or even in the paid bill folder. You will know where to get them if you need them, many times, you won't need them unless liens are filed. At the end of the year, the paid Bills folders can be stored away and new file folders created for the new year.

File paid bills in file folders labeled for each letter and/or for your major vendors:

"ABC Electric, Paid 2009"
"A-Misc, Paid 2009"
"B-Misc, Paid 2009"

Email sarah@successif.biz if you would like a word document ready for printing onto labels of your "Alpha- Misc Paid 2009" file folders.

Getting to 100% Complete on Jobs

Following is a repost of an earlier blog post, I have many contractors ask about this process:

Most software written for construction will automatically calculate a percentage complete on a job. This percentage is a percentage of actual costs to the job budget. If you haven't entered a budget, most software will calculate the percentage as 100% because it will assume your budget should be what your costs are. The way to avoid this problem of course is to be sure you enter a budget for every job.

Another challenge in construction is to get the calculation to 100% complete when the job truly is complete. It is rare that a jobs cost is equal to its budget. There will most always be a slight variance. I recommend the following when a job is complete.

1. Set up a cost code or tracking code called "over/under budget".
2. Review the job (see previous blog) to be sure it is complete.
3. Enter an internal change order (which only posts to budget, not to contract amount) for the amount of the difference so that you force the budget to equal the final costs.

Be sure to record the amount in #3 to the code called "over/under budget", this preserves your original budget figures and also allows you to see your "over/under budget" amount by job at any time which would be a great report to view by Project Manager, Estimator or Crew Leader over a specific length of time.

Taking the next step

You've purchased new accounting software, you may even have integrated estimating software and may be sending your bids from the estimating package to the accounting package. Wonderful, you have done well. Now you are ready for the next step. Some of the setup procedures that sometimes take a back seat to be done later may need to be reviewed. Now is a good time to choose one more task to get you closer to your goals:

• General Ledger Budgets - set up projections for income and expense accounts to keep the numbers in check and make it easy to review on a monthly basis.
• Statement of Cash Flow - is it set up, do you know how to read it?
• Fine tune your Chart of Accounts - get rid of accounts that were ".. in your software" and are not used by your company, summarize some accounts so that your income statement is clean, or your balance sheet includes totals of all vehicle loans allowing you to refer to supporting schedules for a detailed list.
• Do you have a remote data backup procedure in place? Put the responsibility in a reliable companies hands to be sure you have a good backup on a daily basis. The benefit far outweighs the cost.
• Is your equipment in good shape and up to par? RAM is very inexpensive these days, good network cards are worth their weight in gold and also inexpensive.
• Is it time to review jobs that need to be closed? Set up procedures for reviewing closed jobs and mark them closed in your software.
• Are you current in your monthly closings? Are procedures written down? Does everyone know their duties as it relates to this important task?
• If you are using QuickBooks, are your items clean and directed to the proper GL accounts.
• Have you scanned your logo and are you using it on your reports? Do your reports look like you want them to look?