Turns out our teachers were right: We really do use math in the real world. And in remodeling, math can get complicated.
We’re not just talking about adding and subtracting fractions. It’s job-costing, margins, depreciation, labor burden, payroll, percentage of completion, cash flow, taxes …
Forget the calculator. Where’s the magic wand?
If you’re anything like Scott Starley, owner of Salt Lake City–based Progressive Remodelers, you’re admittedly “not a numbers person,” and that’s OK. Professional accountants and smart bookkeepers are at the ready, armed with software and experience to help put the decimal points in the right places.
Even if you know your numbers inside and out, building a relationship with an accountant can alleviate the stress that comes with finance-related business questions.
Rational Numbers
“Two heads are always better than one, and I really like having someone in the office,” Starley says of on-staff bookkeeper Bob Cole whose background drew Starley’s attention.
“I had used just a bookkeeper in the past, but I found it was very limiting on what that person could contribute to the overall wellness of the company,” he says. “Because Bob has a degree in accounting, he brings more to the table, like strategy and money management.”
7 Interview Questions
What to Ask
- “Tell me about your business experience.” Solid small-business accounting experience is a must, and having clients in the remodeling industry is even better.
- “What services do you offer?” Some firms are one-stop shops for job-costing, payroll, and more. Make sure the service menu matches your wish list.
- “If I were starting over today, what methodology would you recommend for my books?” This should prompt a knowledgeable response about the differences between cash, accrual, and percent-complete accounting.
- “Can you show me examples of reports you can run?” Financial statements, budgeted vs. actual reports, charts of accounts, and other items should be readily available.
What to Answer
- What type of business structure do you use? S-Corp? LLC?
- How much do you know about accounting? Business owners should understand basic accounting, but a good accountant should be able to patiently explain anything you don’t understand.
- What are your goals? Have a solid idea of where you came from, where you want to go, and how you want to get there so your accountant can partner with you.
What to Bring
- Profit-and-loss statement
- Balance sheet
- Most recent personal and business tax returns
- Business plan and goals
Day-to-day, Starley has Cole focus on bookkeeping tasks, such as job-costing, and has an accounting firm handle his taxes. While the smallest companies may employ only a bookkeeper, business owners should consider each position’s scope of work. In some cases, accountants can do both jobs, but bookkeepers rarely handle complete financial oversight.
Co-Efficiencies
“Like most of us, my business started small. There wasn’t a need or income to cover the expense of an accountant at first,” says Rick Hjelm, president of Phase II General Contractors, in Lakewood, Wash. “As my business grew, the financials got complicated.”
Having worked with three different accountants over time, Hjelm says that personal rapport is important and that finding someone who understands remodeling is essential.
John Sperath agrees, saying remodelers need a financial education as well. “Before I started my current business, I never knew how to read a P&L. I had another company that succeeded by accident. That might be OK for a single-truck handyman, but when you reach a certain level of professionalism, you need to know your numbers,” says the owner of Blue Ribbon Construction, in Raleigh, N.C. “If your accountant can’t help you learn, find someone else.”
Sperath works with Debbie Combos, president of Accounting, Etc., in Cary, N.C. Combos parlayed her experience in cost accounting for a national home builder into a successful business niche. “Besides tax accounting, builders and remodelers often need a lot more services, such as project costing,” she says. Accountants familiar with remodeling will know how S-Corp and LLC tax returns relate to personal returns and can identify finished jobs and those that will carry forward to the next tax year. “These are important considerations that a bookkeeper might not know how to do,” she points out.
Colleagues and association chapters can point remodelers to affordable, trustworthy accountants. “Debbie worked with several of my peers and word got out that she was a good accountant,” Sperath says. “If you’re a member of NARI or NAHB, or have a trusted peer, that’s a great resource.”
The Right Frequency
How often you meet with your accountant depends on your needs and comfort level with numbers. Try checking in quarterly with your accountant, particularly if the business or relationship is new. “People who are less accounting-savvy would benefit from a quarterly review with a sit-down meeting,” says John Sperath, owner of Blue Ribbon Construction, in Raleigh, N.C.
Debbie Combos, president of Accounting, Etc., in Cary, N.C., agrees, but says that face-to-face meetings are less common. “With email, we’re seeing fewer in-person meetings,” she says. “We know our clients are busy. E-mailing files and talking about them over the phone works for them.” If quarterly seems too frequent, Combos says touching base twice a year will work. One of those meetings, usually in the fall, should include a pro-forma tax return.
Rick Hjelm, president of Phase II General Contractors, in Lakewood, Wash., sends his software files to his accountant quarterly, works with her biweekly on payroll, and touches base weekly. “We view an accountant as a team player,” he says. “If I’m not succeeding somewhere, she can give us a new approach to try. When they have your back, it’s a win-win.”
Absolute Value
Michael Sauri, president of TriVista USA, in Arlington, Va., chooses a different approach for his financial team. “As long as he understands our tax and business situations, I don’t feel I need an accountant who knows remodeling,” Sauri says.
Instead, Sauri hired a bookkeeper who works only with remodelers. Her experience lets her effectively communicate her clients’ numbers to accountants come tax time. “I need my bookkeeper to help me run the business,” Sauri says. “I need my accountant to help me with tax prep and planning.”
For both positions, Sauri prizes honesty and candor. “These people need to force you to look with vigilance, precision, and consistency at where you really are financially,” he says. “Not where you think you are.”
Hjelm agrees. “An accountant will keep you from doing dumb things,” he says. “It’s as if your mom is watching over your shoulder and gives you a quick reprimand or a needed course correction. It comes from a place of respect and sincere concern because they want you to succeed.”
Speaking of tough love, Sauri says that remodelers who enlist their spouse to handle the books may want to reconsider. “There are a lot of companies where the husband has the toolbags and the wife takes on the bookkeeper role by default,” he says. “Turning to someone who isn’t your spouse and who can look at the numbers in black and white, bonk you over the head and ask you, ‘What are you thinking?’ could be a big help. The fact that my wife doesn’t have to do that takes a lot of grief off of our marriage.”
In all seriousness, working with unbiased professionals can benefit any small-business owner. Hjelm knows he’s good at remodeling and working with people and that his accountant is good at managing financials. “To keep a constant watch on either responsibility requires a lot of time,” Hjelm says. “I can’t do it all and do it all well. I had to learn to trust that relationship, let go of the financials, and only deal with what I need on a day-to-day basis.”
Prob-Abilities
Taxes: Accountants help ensure that business and personal taxes are filed properly and can also appropriately take advantage of tax loopholes. “Some people want to take advantage of every loophole and end up burdening their businesses with their family’s cell phone bills, new personal vehicles, the family boat,” says Michael Sauri, president of TriVista USA, in Arlington, Va. “A good accountant will help you determine how those loopholes can help or hurt your business and will keep you out of trouble.”
Financial advice: Discussing major financial decisions with your accountant is a must. John Sperath, owner of Blue Ribbon Construction, is glad he did. With all the paperwork drawn up at the dealership to buy a new personal vehicle, “I said, ‘Let me call my accountant,’” he recalls. “She said, ‘Are you crazy?!’ We had taken an accelerated depreciation on my existing vehicle. If I sold it, we would have had to pay that back.”
Payroll: Some accountants handle payroll checks and taxes. Ask about this service in your interviews or consider a standalone payroll service instead.
Job-costing: Full-service accountants familiar with the industry may be able to help here. “When we take care of job-costing and bookkeeping, it lets us see the whole system and each project from start to finish,” says Debbie Combos, president of Accounting, Etc. “That gives us a better perspective on the company’s financial situation throughout the year.”
Future planning: After a health scare, Rick Hjelm realized that, “if I die, 10 people are out of a job,” says the president of Phase II General Contractors. With two succession plans (one for retirement and one in the event of his death), Hjelm knows his accountant can complete assessments and business valuations and handle insurance payouts or signing over the business.
Business audits: As Sperath’s full-service accountant, Combos can help handle workers’ compensation or general liability audits, as well as annual license renewals.
Picking stocks: Accountants can identify when IRAs, 401(k) plans, or other investments could benefit the bottom line but they are not responsible for choosing which stocks fund those investments. Consult a financial planner.
Consumer finance: Accountants know business numbers and money, but they’re not banks.
Some accountants offer more services than others, but none of them can fill every business position.
For more on break-even see “Determining Your Break-Even Point,” by Leslie Shiner, THE JOURNAL OF LIGHT CONSTRUCTION, Apr/06, and “Strategic Budgeting and Your Break-Even Volume,” by Joe Stoddard, JLC, Aug/10. Both articles are available in the JLC Archive.
