QuickBooks For Contractors

1. QuickBooks For Contractors Instructor: Denise Chew, Loupe Consulting Teaching Assistants: Nathan Bernard, Jacob Geller, Derrick Kwan

2. Agenda • Profitability & Cash Flow (where is the money)? • Idealism vs. the reality of QB • Suggested changes to QB • The numbers you really want to see (& use) • Timing & Control (systems that impact your ability to “see”) • Cash vs. Accrual accounting; methods of data entry and QB’s default parameters • WHAT and WHEN you want to see about/in your business determines the needed QB configuration and supporting system. • Business and Job level metric reporting • Again, WHAT and WHEN are enabled (or disabled) by QB. • Identify your specific needs, configure reports, make a “change later” list to be implemented by your bookkeeper(s).

3. Profitability & Cash Flow • Profitability • Frequency of assessment • Formality of assessment • Quality of assessment • Usefulness of assessment • Cash Flow • Frequency of assessment • Formality of assessment • Quality of assessment • Usefulness of assessment

4. Company Example • 15 year old contracting entity, ~4mm/year in sales • Specializes in single room of the home • Materials are purchased • Subcontractors for all phases of build and they are paid by the hour for each job • Installers • Plumbers • Electricians • Jobs last 1-4 weeks The ICF statement for this company is going to look very different from the “Text-Book” Version

5. The ICF – Textbook vs. QB Reality (a Quality issue) What do you notice in the example co. ICF? Look at the Balance Sheet as well.

6. QuickBooks can generate a cash-flow statement for you through the report center

7. Change QB Settings (must be logged in as Admin)

8. The FCF – Textbook vs. Reality (a Usefulness issue) What you choose to do with that “free” cash is up to you!

9. FCF Math

10. FCF for ExampleCo (real data, formatted to tell the story)

11. Example Co. Income Statement

12. FCF Practice • Using worksheet for Example Co • Balance Sheet Differences • Articulation of Impact on Cash • Categorization to tell the story • Now do your own (with assistance as needed) • What do you see? Don’t forget to error check yourself, your cash balance from the math has to match the cash balance on the balance sheet.

13. Reminder of why you care…. • Free Cash Flow is the: • Money I can take home • Money I can pump back in • Revenue= $500,000, WC= $50,000, so WC/Sales= 10% • If FCF= $30,000, What Percentage of Growth can be self funded? What is the level of sales that can be generated? • Money I can service additional debt and use someone else’s money to grow

14. Timing & Control (Getting to both Quality & Usefulness) • ExampleCO system • Issues & Resolutions • Moving of the system driver/control point (using QB better) • Changing the QB processes used • Rethinking the order of workflow operations • Reassignment of labor

15. WHAT and WHEN • What reports would you look at? • When would you want to see these reports? • What are the barriers to understanding these reports? • How did you choose these reports? Time for Work Sheet on Reports

16. Enabling the WHAT and WHEN

17. Range of Reports What do I want to be able to see

18. Cash vs. Accrual Income Statement – WHAT YOU DID 1 2 Accrual Cash Cash Flows – WHERE ALL THE MONEY WENT

19. The Processes in QB

20. Reporting is Conditional

21. All Possible Reports Some,not all reports Reporting is conditional When How much ($) How ITEM What/Why To/From Whom

22. Configuration & Implementation • Follow the money AND the generation of data • Balance • # process steps • Usefulness of detail obtained (i.e. level of detail in tracked items) • Consistency of method (less things to master) • Users & Permissions • Consider all three gears (or layers) inherent in a system. (as taught by Professor Marty Anderson @ Babson in Extended Enterprise Management)

23. What are some of the pain points from your work sheets?

24. Budget vs. Actual cost per Job • QB Process & Settings • Using Estimates • Assigning Customer:Job • Treatment of Labor/Payroll • Accounting Process • Accrual • Timing & Control • Is all the data present • Reports to Run • Estimate vs. Actual > Modify > Filter • Common Problems/Errors • Missing Data • Unallocated Data (unassigned) • 0/1 {null} thinking

25. Bad vs. Good (Budget vs. Actual)

26. Cash Need to Finish Job? (Open PO’s per Job) • QB Process & Settings • Using Purchase Orders • Assigning Customer:Job • Accounting Process • Accrual • All things get PO’s or just some? • “Units” to use for items ordered  What about partial pay on subcontractors? • Timing & Control • Is all the data present? Including the non-posting PO information? Are the person who order and who enters data the same? • Reports to Run • Open PO by Job> Modify > Filter • Common Problems/Errors (resulting in different answers on different reports) • Mis-Timed Data, Mis-Entry of “expense” rather than “item” on a bill • Unallocated Data (unassigned)

27. Next Steps • Ones from your lists • QB Process issues • Data methods issues • Timing & Control Issues • Action Item Lists • Translate wish list into action items

28. QuickBooks For Contractors dchew@loupeconsulting.com nbernard@bu.edu