39(+) Tips,Techniques, & Opinions

Controlling Profitswith QuickBooks®

Diane C.O. GilsonPresident, Info Plus(+) Accounting®, Inc.

Certified QuickBooks Advanced ProAdvisorCertified QuickBooks Enterprise ProAdvisor

© Info Plus Accounting PC, Ann Arbor, MI 48104(734) 544-7620 � web: www.InfoPlusAcct.com � e-mail: Help@InfoPlusAcct.com

Diane C

.O. G

ilson President, Info Plus

(+) Accounting

®, Inc. C

ertified QuickB

ooks® A

dvanced Pro Advisor

Certified Q

uickBooks

® Enterprise ProAdvisor

Info Plus

(+) Accounting

®, Inc. 2370 E

. Stadium

Blvd., #1020

Ann A

rbor, MI 48104

E-m

ail:help@

InfoPlusA

cct.com

Phone: 734-544-7620

Fax: 734-544-7617 Toll-free: 866-244-2228 W

ebsite: ww

w.InfoP

lusAcct.com

BIOGRAPHY:

Diane G

ilson created the accounting firm of Info P

lus(+) A

ccounting® in 1994 w

ith the intent of providing current and future-oriented m

anagement accounting services to sm

all and medium

-sized businesses. Since the firm

’s inception, D

iane has worked exclusively in Q

uickBooks

® – a powerful, flexible, m

ulti-functional software

accounting system currently used by 70-85%

of small to m

edium-sized businesses in the U

nited States. S

he is a C

ertified QuickB

ooks® A

dvanced Professional A

dvisor and Certified Q

uickBooks E

nterprise ProA

dvisor (through Intuit), and a C

ertified QuickB

ooks®consultant (through the S

leeter Group C

onsultants Netw

ork).

Although the firm

has a number of clients in the service, technology, retail and other industries, 80-90%

of Info P

lus Accounting’s clients are in the construction and m

anufacturing industries. Diane, and her accounting staff

have chosen to provide enhanced services for these industries because QuickB

ooks® is especially suited to their

needs for understandable, useful job costing and profitability reports.

Background and credentials

In addition to her various QuickB

ooks® certifications, D

iane initially earned her CP

A licensure in 1981, and, w

hile not currently perform

ing public accountancy services, is registered as a CP

A in M

ichigan. She also achieved the

Certified Internal A

uditor designation during her banking career, and earned her Intuit MasterB

uilder Professional

Advisor certification in 2002. S

he brings more than thirty years of varied auditing, tax, com

puter accounting system

s, budgeting, training, and managem

ent accounting experience to her QuickB

ooks consulting practice. B

efore founding Info Plus

(+) Accounting

®, she worked for a national H

onor Society, and as a licensed C

PA

for a regional C

PA firm

. She then spent fourteen years in banking first as Internal A

udit Manager, and then as

Manager of M

anagement A

ccounting Systems, w

here she established Bank-w

ide planning, goal setting, and budgeting processes, accountability reporting, and activity-based-cost (A

BC

) profitability measurem

ent systems.

In addition to her firm’s daily, one-to-one Q

uickBooks support w

ork with clients throughout the U

.S., the com

pany currently offers Internet-based “Q

uickBooks for C

onstruction” webinars (sem

inars) for any business or individualw

ith high-speed Internet connection. Diane is also an N

AHB U

niversity of Housing Instructor for their “Business

Accounting and Job Cost” and “Financial Managem

ent” courses and has authored a series of articles for various N

AH

B publications (including N

ations’ Building New

s Online) relating to sm

all-business anti-fraud protection techniques as w

ell as another series, “The QuickB

ooks® C

hallenge”.

She is the creator of various E

xcel-based accounting support calculators & checklists, developer of

AccountingPR

O™

, a robust QuickBooks P

ro template (file) and support system

created especially for builders, developers, and rem

odelers, and is the author of Accounting w

ith QuickB

ooks for Hom

e Builders &

R

emodelers (originally published by B

uilderBooks, a division of the N

ational Association of H

ome B

uilders). Her

techniques and products have also been featured in other industry publications as well as in Intuit’s Q

uickBooks®

Pro A

dvisor New

sletter, Developer N

etwork, and P

roConnection N

ewsletters.

Diane’s expertise and industry experience has earned her a variety of speaking engagem

ents for various organizations including the M

ichigan Association of C

PA

s, CA

P (C

ontractors’ Assistance P

rogram), the (N

ARI)

Rem

odel Am

erica (National) S

how, the D

wyer G

roup, the Midw

est Builders’ S

hows, the C

ustom B

uilders S

ymposium

, the National R

emodelers’ S

hows (six of the last 7 show

s), the International Builders’ S

how (six of the

last 7 shows) and various other national, regional, and local construction show

s and training seminars.

1

Overview

–Today’s Session

�A

dding Accuracy &

Control w

/Purchase Orders

�C

ontrolling Costs w

/Estimates &

Change O

rders�

Item List Secrets

�Tim

e Tracking, Payroll & Labor B

urden�

Promoting Profits w

ith Variance Reports

�In-house A

ccounting –Pros &

Cons

Q &

A

�Faster, B

igger Bank D

raws &

Cleaner C

losings�

Tips & Techniques for getting started

In-house Accounting -Pros

A sm

art,tight,reliable,timely

financial reporting system can:

�K

eep you in touch with the financial side of your business

�G

uide you in setting achievable goals

�G

ive you confidencein your pricing

�H

elp you to spot and avoid losers

#1 -Opinion

In-house Accounting -Pros

A sm

art,tight,reliable,timely

financial reporting system can:

�Provide feedback

to managers and supervisors

�C

ontroloperations

�M

inimize surprises

�M

ake you wealthier!

#1 -Opinion

In-house Accounting -C

ons

A poorly-designed,inadequate, uncontrolled

in-house accounting system (or bookkeeper) can or w

ill:

�D

rive you away from

the financial side of your business

�Lim

it your ability to achieve goalsand/or

grow your com

pany

�Leave you in the dark regarding the adequacy of your pricing

�R

educe your ability to spot and course-correct problems

#2 -Observation

In-house Accounting -C

ons

A poorly-designed,inadequate, uncontrolled

in-house accounting system

(or bookkeeper) can or will:

�Provide no objective feedback

to managers &

supervisors

�Encourage fraud and/or other costly behavior

�Prom

ote unpleasant surprises

�K

eep you financially strangled!

#2 -Observation

Lists –D

imensions of Info

�Think of inform

ation in“structural dim

ensions”:

�A

ccounts (1) –“R

ows”

�C

ustomers: jobs (2) –

“Colum

ns”

�Job process (3) –

“Depth”

�Locations, product lines, or

divisions (4) –“Filters”

#3 -Tip

2

Lists –A

ccounts & Item

s

Lists drive reportsand are very flexible

Chart of

Accounts

Items

List

#4 –Q

B Feature

Lists –C

ritical to Success

�“B

egin with the end in m

ind.”C

arefully designlettering, num

bering,and rollup system

s for your lists

�These LISTS

are the first key to successful results!

-Chart of A

ccounts-Item

List(linked to C

hart of Accounts)

-Custom

er:job List-Payroll Item

s List (linked to CO

A)

#5 -Technique

Lists�Som

e lists (e.g., chart of accounts, items,

customer:jobs) allow

“sub”elem

ents which

creategroups &

subtotalsw

ithin reports

�U

nderstanding how lists and

sub-systems fit together, and

interact, is critical!!!

#6 -Technique

Lists –G

eneral Notes

�Item

s: Use service item

s(vs. accounts or classes)

to build “process”and “standard”

reports. (W

e learned this lesson the hard way!)

�Payroll Item

s:U

se payroll items to

allocate labor burden rates

#7 -Tips

�G

eneral: Use SU

BTO

TALS and SU

MM

AR

IESto provide additional, valuable m

anagement

information

Bonus –

Roadm

ap!

Lists -Item List Secrets

�For T&

M application: C

reate two-sided

“smart”

Items

�A

dd codesto your Item

s(ordering of Item

s, easier entry)

�G

roup & sort your Item

sin job-stage order

�U

nderstand Item types

and when to use each

(Tip: Use “Service”

Items

for job phases)

#8-#11 -Techniques

3

Lists -Item List Secrets

�U

se titles and descriptionseffectively

�Include

default descriptions in Items

(easier entry, confirms correct selection)

�C

ode income/costs to Incom

e Statement

(temporary “hom

e”before W

IP entry)

�C

reate additional Items for:

deposits, multiple “draw

s“and "extras"

#12-#15 -Techniques

Estimate –

T&M

or Cost Plus

#16 –T&

M Technique

Estimate –

Fixed Price

#17 –FP Technique

Estimate –

Change O

rder

#18 –C

O Technique

Improve your bottom

line

�Exam

ple:C

hange orders & allow

ances

If your annual gross income = $1,200,000

Just a 0.5% im

provement =

�U

se better information to increase collections on

change orders and allowances —$ 6,000 per year

Improve your bottom

line

�Exam

ple:Pricing your jobs

�U

se better info to price jobs more accurately —

If your annual gross income = $1,200,000

Just a 2% im

provement =

$ 24,000 per year

4

Creating Invoices

�Prepare invoices converted from

estimates

–including

Percentage of completion

(line-by-line or in total)

Other Invoices &

Statements

�Prepare Stand-alone invoices (e.g., for fixed-price jobs)

�A

ssess finance charges(enhance cash flow

)

�C

reate Statements (history and aging of invoices

& paym

ents received)

Control &

Accuracy w

/PO’s

Utilize

purchase orders (P.O.'s)

PO Technique –

Part 1:1.

Create “Internal U

se Only”

Estimate

(include anticipated vendors) and print2.

Create PO

’s from Estim

ateusing identical Item

s(additional detail on PO

’s is OK

!) #19 –Technique

Control &

Accuracy w

/PO’s

Convert P.O

.’s to bills……

When a vendor w

ith a PO is entered

to a bill, check or credit card,……

.

Voila! Data is copied from

PO to bill,…

.C

ontrol: If incoming bill is greater than am

ount copied from

PO, there is a problem

to be resolved BEFO

RE the

bill is paid! (Overcharge? U

nrecorded Change O

rder?)

#20 –C

ontrol

Control &

Accuracy w

/PO’s

Utilize

purchase orders (P.O.'s)

PO Technique –

Part 1:R

ESULTS:

�W

hen PO is converted to a bill or check, the identical

Items, am

ounts, and jobare copied into the transaction.

�Estim

ate vs. Actual reports

will show

actual costs on sam

e line Items as Estim

ate!�

“Pre-entry”is easy, accurate and painless #21 –

Accuracy

Control &

Accuracy w

/PO’s

Utilize

P.O.'s

(continued)

PO Technique –

Part 2:For vendors w

ith multi-billings:

�Put the total $ in the Q

TY column

�U

se $1.00 in the “per unit”colum

nE.g., 5000 Q

TY x $1 = $5,000 Total cost

RESU

LT:Each bill entered w

ill “DR

AW

DO

WN

”the total show

n in the PO (vs. closing

the PO as

would norm

ally happen with a partial bill).

#22 –“W

orkaround”for

Tracking & C

ontrol

5

Improve your bottom

line

�Exam

ple:

Control contractor costs

�U

se improved controls (e.g., P

urchase Orders) to

negotiate and control contractor costs —

If your annual gross cost = $400,000A

modest 3%

savings = $ 12,000 per year

Improve your bottom

line

�Exam

ple :

Control m

aterials costs

�U

se improved controls (e.g., P

urchase Orders) to

negotiate and control materials costs —

If your annual gross cost = $400,0002%

savings = $ 8,000 per year

Time Tracking &

Payroll SystemTim

e Tracking & Payroll System

�Entertim

esheets(by job &

job phase):

#23 –Technique

Time Tracking &

Payroll System

Various Time R

eports are available(by nam

e, job, service Item, etc.)

#24 –C

ontrol

Time Tracking &

Payroll System

Time can be

accessed and copied to an invoice from

the “Tim

e &

Costs”

button

#25 –Technique

6

Time Tracking &

Payroll System

Create payroll

from tim

esheets(as needed, orafter-the-fact)

#26 –Tip

Time Tracking &

Payroll System

Two m

ethods to use QB

toautom

atically assign or allocate

other employee-related costs to jobs:

1.Set the Q

B File Preference to auto assign

Payroll taxes and specificbenefits, e.g.:

-Social Security -M

edicare -U

nemploym

ent -U

nion costs

#27 –Technique

Time Tracking &

Payroll System

2a.Use Excel to com

pute labor burden costs

by employee:

�A

djust hours DO

WN

to actual production hours�

Adjust costs U

Pfor otherem

ployee costs –e.g.:

�W

orker’s Com

p�

Health insurance

�C

ell phones�

Equipment usage

#28 –A

dvanced Technique

Time Tracking &

Payroll System

Labor burden -Spreadsheet example:

Class Exercise

Time Tracking &

Payroll System

2b. To automatically assign additional

labor burdencosts to jobs:

2c. Make a m

onthly journal entry to m

ove the “credit”side of the

entries to your NJS

(non-job specific) job

�Establish an “Allocated Labor B

urden”A

ccount�

Establish an “Allocated Labor Burden”

Payroll Item

linked to that account (both debit and credit)�

For each Direct Labor em

ployee record: Add that

Payroll Item and specific “additional”

LB percent

#29 –A

dvanced Technique

Improve your bottom

line

�Exam

ple:Increase employee productivity

�Set specific targets and goals for em

ployees —½

hr per day saved = 6.25% im

provement

If your annual gross labor cost = $200,000A

nnual cost savings = $ 13,500O

RA

nnual gross revenue increase of $18,000*

*Assum

ing a 35% m

arkup on labor cost

7

Time Tracking &

Payroll System

�Pay and track payroll-related liabilities

�C

reate federal payroll reports(941, 940, W

-2s) with

certain Intuit payroll selections

�R

un detailed payroll reports for payroll audits

�W

e often also recomm

end using an outsidepayroll service

(for various other reasons)

Profits from V

ariance Reports

Profits from V

ariance Reports

Estimate vs.

Actual reports

provide criticalday-to-dayC

ontrolInform

ation -

Use them

!

#30 –Tip

Profits from V

ariance Reports

Who review

s?

What should

they see?

How

oftenshould job costreports bereview

ed?

#31 –O

pinions

Profits from V

ariance Reports

Strengths of reports:�

Detailed “sum

mary”

by job stage(drill dow

n to see detailed transactions)�

Course-correct quickly or “m

ake up”over-runs in later stages

�C

hange order income to date is visible

�$ Invoiced to date is visible

Weaknesses of reports:

�Estim

ates are not time sensitive

�Q

uantity does not show�

Actual costs m

ay end up on wrong lines

�N

eed to review “O

pen POs by Job”

report to see rem

aining comm

itted costs.

#32 –O

pinions,…

Profitability & W

ork in Process

�Take all direct costs to C

OG

S first�

Create adjusting entries to m

ove $ to balance sheet as necessary E.g., U

se quarterly entries for:�

Spec homes

�Percentage of com

pletion�

Other w

ork in process

�R

everse balance sheet entries the following day

�R

epeatas needed

#33 –W

IP Technique

8

Speeding up Bank D

raws

Cash Flow

Enhancement Technique :

After PO

s are entered and “firm”:

�Field supervisors

report completion of w

ork�

Convert PO

s to billsas of w

ork-completion date

(Tip: set a unique due date for bills not yet received)�

Include those costs in bank draw requests

�M

atchfinal bill from

vendor against bill in system and

revise due date�

If actual bill received is different from prior entry, enter

additional bill or credit mem

oin subsequent period

#34 –Tip

Speeding up Bank D

raws

Cash Flow

Enhancement Technique :

RESU

LT:�

Costs and payables

are entered more prom

ptly:�

More accurate reports

�Faster cash flow

�Faster paym

ents = happier contractors

�B

ank inspectionsw

ill verify that work is com

plete�

Open Purchase O

rders by Jobreport show

s remaining

“comm

itted”costs,…

#34 –Tip (results)

Closings -C

ollect your funds!

Collecting w

hat is due to you:

BEFO

RE C

LOSIN

G –

�C

arefully review all Job cost reports for

amounts

that may be “chargeable”

and collectible from

cliente.g.:�

Change orders

�U

pgrades/allowance overages or credits

�C

arefully review all open PO

sfor am

ounts not yet entered as bills (“com

mitted costs”) for the sam

e issues

#35 –Tip

Closings -C

ollect your funds!

Collecting w

hat is due to you:R

ESULTS:

�Final accounting &

problem resolution

takes place before the deal is finalized �

Funds are collected as part of the legal process

�“A

fter-the-fact”surprises and losses

are minim

ized

#35 –Tip (results)

Improve your bottom

line

�Exam

ple:

Change orders &

allowances

If your annual gross income = $1,000,000

Just a 0.5% im

provement =

�U

se better information to increase collections on

change orders and allowances —$ 5,000 per year

Improve your bottom

line

�Exam

ple:

Increase production

�W

ith more effective and efficient operations in place,

take on additional work —

E.g.,

$200,000 additional work at a gross profit of 25%

= Additional incom

e of $50,000 per year

9

Improve your bottom

line

�Exam

ple:D

ecrease admin costs

�O

rganized, accurate, records and profitable operations also create other possible savings such as reduced

costs for:�

Outside accounting services

�Tax preparation

�Tax penalties

�Interest (due to reduced debt)

(Savings depend on actual circumstances)

Installing and using a job-cost systemis not an

EVENT

It is aPR

OC

ESS, . . . . .

WA

RN

ING

:

Tips & Techniques

#36 –O

bservation

Tips & Techniques -C

osts

�Value and Investm

ent options?

�W

hat do you need NO

W? E.g.:

-Timely inform

ation -Job cost info -C

ost controls

�W

hat will you need in the FU

TUR

E? C

onsider: -G

rowth

-Users

-Profitability goals#37 –

Considerations

Tips & Techniques –

Getting Started

Need a quick start?

Use a Q

B

construction industry template

(pre-created file). Look for:

�“Scalability”(Flexibility to m

eet your company’s ongoing info needs)

�M

emorized transactions

(To help with difficult transactions)

�U

se of QB

P’sadvanced applications

(e.g., Estimates, Purchase O

rders, and construction-specific reports) to help enhance profitability

#38 –Tip

�Start at a basic leveland m

ove on to more detail

as your understanding grows

�G

ive it time!

And

consideration, …

Tips & Techniques –

Getting Started

#39 –Tip

Tips & Techniques –

Getting Started

�Total annual im

pact ?$___________

10

�B

e diligent –Your rew

ards will

ultimately exceed your efforts!

Tips & Techniques –

Getting Started

#40 –O

bservation

Summ

ary –Today’s Session

�A

dding Accuracy &

Control w

/Purchase Orders

�C

ontrolling Costs w

/Estimates &

Change O

rders�

Item List Secrets

�Tim

e Tracking, Payroll & Labor B

urden�

Promoting Profits w

ith Variance Reports

�In-house A

ccounting –Pros &

Cons

Q &

A

�Faster, B

igger Bank D

raws &

Cleaner C

losings�

Tips & Techniques for getting started