You’re an expert at what you do as a contractor. Whatever your craft may be, you are the best of the best. You have your own business, and you do quality work that people talk about to each other all of the time. Excellent!
The question is, are you paying attention to your numbers? That is, do you have allocated money to over-head costs? What about an income statement? Do you have a balance sheet that summarizes the company at any given point? These are just a few of the basics, and if you have all of them plus more, excellent work. If not, don’t worry, you can create them and even learn how if you’re not good with numbers.
The Balance Sheet
The basic idea of this is to provide a summary of where a business is at a point in time. It has the assets, liabilities and owners’ equity all calculated out on some kind of spreadsheet. This is important to have because it tells you exactly where the company stands from an overview standpoint. It can tell you if you have the money to grow, or stay where you are.
Allocating money to over-head costs for jobs is important. It is a great idea because it can also give you an idea if you are making money on the job. Although it is not directly related to the actual labor and products put into a job, you will run into these things. Having money ready for whatever it may be, will save you in the long run, and ultimately make the job more profitable.
This is just how it sounds, and you probably already know what it is. The basic idea is how much money have you earned, or lost, and also gives you the operating expense for given time periods. One of the more fundamental tools that is needed, it gives you a good idea what jobs do better, and what expenses that can be cut if applicable.
These are just a few of the basics of accounting for your business that you can do and really is not incredibly hard to learn. If not, then there are construction-specific software choices out there. There are some that will automatically calculate over-head costs, which would be incredibly nice. So if you don’t really want to learn all of the numbers, that software will help tremendously. So be sure that you pay attention to your numbers, that way you can run a profitable business!