Recent Articles

Construction Industry Standards

The construction industry has standards of performance and cost ratios. These standards and ratios are evaluated to determine if your business is performing well or below what is considered reasonable.

Using Cash in Construction


There is a notion in business that using cash to pay for materials or service is illegal.  IT IS NOT ILLEGAL TO PAY FOR MATERIALS OR SERVICE WITH CASH.  It is illegal to do this if you do not properly document the transaction.  This is especially [...]

Branching Out in Construction


When you own a small construction company many people depend on you.  There is your family, employees and subcontractors.  A typical $2,000,000 per year operation will have upwards of 20 people dependent on the contractor for their livelihood.  [...]

Contractor’s Profitability


I’m surprised at how many visitors to this section of the website are oriented to what is a fair profit for a contractor.  I’m not referring to the industrial or the commercial contractor; I’m referring to your standard residential [...]

Construction Draw Schedule – Ranch Model Home


This is a basic draw schedule explanation for an A-frame ranch model home.  This article details the draw schedule format illustrated below.  It details the approximate percentages for the respective phases of construction and explains how the [...]

How to Use Class Accounting in Construction


Class accounting is a form of accounting whereby the revenues and direct costs are grouped into divisions within the company.  It is a very effective form of accounting in construction.  Learning how to use class accounting in construction is easy [...]

What is a Reasonable Profit in Construction?


For any company, profit is based on the risk reward concept.  So in construction, what should be the profit (reward) given the risk?  What is a reasonable expectation given the industry and the particular business?  There is no single correct [...]

What is a ‘Spec’ House?


When a builder constructs a house without a contract, it is known as a spec house or a speculation home.  There are several advantages to the builder to build a spec house including timing, financial gains and workforce retention.  There are [...]

Use Phase Accounting in Construction – Part II (Trades)


The most effective form of a financial feedback loop in residential construction is phase accounting.  Phase accounting is a subset of cost accounting and generates accurate information in the world of new home and residential additions for small [...]
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