Project Accounting Principles for Residential Contractors
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Almost every residential contractor I had as a client had no clue of their financial position as it related to any one of their residential contracts. None of them knew whether the project was fully funded, over funded or unfunded at any point in the construction process. The only time they knew if they made any money was once all the sawdust had settled and there were no more bills coming into the office related to that project. Typically it would be two to three months after the final closing on the project.
This is poor project management, really poor management.
As a contractor you need to know at any given moment the exact financial position your company has in any given project. You need a good project accounting process to provide all the needed information.
If you use good accounting processes to manage the flow of information then you can easily determine your financial position in any project at any time. To me, the most important aspect that I would want to know is: ‘How much of my money is in this project?’
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