Category: Construction Industry Standards
-
What is a Reasonable Profit in Construction?
For any company, profit is based on the risk reward concept. With 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 answer. The construction industry is divided into several significant branches. This article is focused on the residential contractor. From…
-
Methods to Reduce Costs in New Home Construction
There are two primary methods of reducing costs of construction. The first is cost negotiation and the second is cost shifting. These two methods have several tools in each to achieve overall price reduction. The following describes each method and the respective tools within each method that you can use to achieve overall cost reduction.
-
Capitalizing a New Home Builder Business
Bankrolling any startup business is difficult enough. Capitalizing a new home builder operation is a leap forward in required funds.
-
Best Format for the Construction Profit and Loss Statement
As a construction company owner, you need a profit and loss statement that conveys information in a format that will identify how much you are truly making as a profit. The best format is a construction profit and loss statement identifying contract revenues, direct costs, indirect costs and the overhead expenses. This format most closely matches the…
-
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.
-
Construction Draw Schedule
A construction draw schedule is a financial tool used by contractors in identifying percentage of completion points in the project for the bank to advance proceeds to the contractor. The construction draw schedule is instrumental in keeping the project moving along.
-
The Financial Truth about Flipping Houses
These two partners in Texas bought a house, fixed it up, and then sold the house. The show illustrated that they made $52,000 from the deal. Really? I have yet to see a deal like that in my accounting experience.
-
Use Phase Accounting in Construction – Part II (Trades)
This section covers the three traditional trades that require a license from their respective state. This is your HVAC installer, the electrician and the plumber. In some contractor may wish to include the septic tank and water well installer. However, I prefer these two be included in the site development phase as they do impact…
-
Use Phase Accounting in Construction – Part I
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 contractors building up to 20 houses per year.
-
A Model of Excellence
By using a concept of feedback and making changes to the business operation, a model of excellence can be achieved. This model allows the contractor to not get nickeled and dimed to the point of going out of business.