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Avoid the Gross Profit Rollercoaster Transcript

In this interview, Diane and Dave Sullivan (host of The Roofer Show podcast) dive into what Diane calls the “Gross Profit Rollercoaster.” They explore why ‘highs and lows’ happen in a business (when the numbers aren’t lining up) and how to avoid those ups and downs.

Why this matters to you: As Dave says, “You can sell all the work you want, but if you’re not pricing your work correctly (because you don’t understand your costs or you don’t understand your numbers), you could just be losing money faster and faster!

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Dave S (00:00):

Let’s get into our interview with Diane Gilson.

Diane, it’s great to see you again. Thanks for coming onto the show.

Diane G (00:07):

Well, hey, it’s good to be here again, too. It’s always so enjoyable to get together with you because you have so many practical applications, and gosh. You’re working with people. You’ve been somebody who’s been in the field, and you’re working with people who are in the field, and that always makes it fun.

Dave S (00:23):

Well, we talk about that three-legged stool all the time. You’ve got to sell work, you’ve got to do work, and you’ve got to keep score. Each of those three legs has to be solid. This is what your business is all about.

It’s banging my head against the wall to try to get these guys to understand how important that third leg, the scorekeeping, the accounting, the bookkeeping, is to have that straightened out.

You can sell all the work you want, but if you’re not pricing your work correctly because you don’t understand your costs or you don’t understand your numbers, you could just be losing money faster and faster. And this is what I think we all see, isn’t it?

Diane G (01:02):

This is what we want to talk about today. Those highs and lows that happen in a business when the numbers aren’t lining up. And so we’re going to walk through some of the reasons that people end up with what I call the “Gross Profit Roller Coaster.”

The Importance of Gross Profit

Dave S (01:22):

And it is a rollercoaster. I’ve been there, and this is why it’s so important to be doing regular financial statements. You can’t just wait until the end of the year and expect to have your CPA tell you if you made money or not. That’s a crazy way to run a business. You’re always looking in the rearview mirror, and you have no idea what you should be looking forward to (through the windshield), and without having that constant correct numbers where you know stand all the time, you can’t plan moving forward.

Diane G (01:59):

Yes, well, as you said, it’s a constant correction process. It’s looking at your bearings and checking the road signs. Are you still headed in the right direction, or did you get routed off somewhere that you didn’t anticipate going? And you don’t have to be off by much. I can’t tell you what the percentages are, but I read somewhere that a plane – if it’s off starts out and it’s off by one degree every thousand miles or something, that’ll end up in a totally different place than you’re going.

Dave S (02:28):

You’re going to end up somewhere else.

Diane G (02:29):

Exactly, or than you intended to go.

Dave S (02:34):

Well, talking about this rollercoaster – and I can certainly relate to it because we went through that a lot. And what we’re talking about here is you get a monthly financial statement, and one month, all of a sudden, your Gross Profit is just huge. You’ve made all this money, so what do you? You go out and buy a new boat. The next month, it corrects itself, and all of a sudden, we just lost a ton of money, and we can’t figure out why this is. And I think that’s exactly what we want to talk about today.

But first, I want to get just a quick background. You’ve been on the show so many times, Diane. I think everybody knows you because you are the go-to financial guru here that I always refer to. And we have a wealth of information from past podcasts that we’ve done.

Dave S (03:27):

The “Cost of Chaos in Your Business” was our first one, and that one is great. Try to remove the chaos in our business.

And we talk about job costing all the time, which we’re going to certainly get into today, and how important that is. Setting up your financials the right way and the easy way. We cover the basics. This is not going back to accounting school. This is the simple basic understanding that you have to have as a business owner. You have to learn this; otherwise, go work for somebody else because you’re never going to be successful if you don’t understand the concepts that we talk about on this show.

But before we get started, Diane, just give us a quick little background on what you’ve got going, and I want to touch base on some of the new classes and some of the new downloads that we’ve got for our listeners. I want to jump into those first thing, but tell us a little about yourself and what’s going on in your business.

Diane G (04:31):

I started out many years ago doing bookkeeping, and then I got into a CPA firm and earned my CPA designation. I worked in banking for 13 years and then started my company, Info Plus Accounting, in 1994.

We’ve gone through a couple of iterations on our websites, but our current website, which really has been in place for some time, is called BuildYourNumbers.com. On that site, we have a lot of information, free blog articles, lots of giveaways, et cetera. We’ll provide links to those kinds of things in the posting of this podcast so people can get to those. But if you just start out at BuildYourNumbers.com, you’re going to find a lot of good free information.

QuickBooks Desktop vs QuickBooks Online (QBO)

I’ve also spent all those years working in QuickBooks Desktop. I will be moving a bit more toward the QBO or QuickBooks Online sometime over the next few months. But the desktop version is really superior for job costing. You can see estimates versus actuals and use purchase orders and all sorts of controls for your business. Does that fill in what you were looking for, Dave?

Dave S (05:46):

Definitely, and that’s the thing I’ve been trying to get you to move toward more information about QuickBooks Online, the QBO, but because so many guys are on there. And I agree with you – the desktop version is so much more powerful, particularly when it comes to job costing and running your business.

But the articles and the downloads that you’ve got on your website are just fantastic, and I recommend everybody go check those out. You can find anything. It’s like going to Google. You’ve got all of this stuff there.

Accounting for Contractors

And the great thing, what I love about your business, Diane, and how we’ve hooked up for over so many years is that you only work with contractors. And we’re not talking about doing accounting for the dry cleaners down the street or the dentist. This is bookkeeping – financials for contractors, and it is a completely different animal than it is regular accounting, right?

Accounting for Manufacturers

Diane G (06:48):

Well, sometimes I will work with a manufacturer; it’s all the same concept, except manufacturing gets to throw some inventory in there. And, of course, some contractors do deal with inventory. So, that inventory aspect is a little less common, but it’s certainly there. But I’d say that about 95% of the people I work with are on the construction side in some way, shape, or form.

Gross Profit Variability

Dave S (07:11):

OK, well, let’s jump into this rollercoaster because it’s a big problem that so many contractors have because I work with them on their financials. And you can see this where month after month, you just have these huge swings. And if you’re bidding your jobs the same way, with the same gross profit, your months should be consistent. You shouldn’t have these big fluctuations that we see (and those heart attacks or the big joy that you have by making so much money.) You have to know what you’re actually making in your business.

So, let’s go ahead and jump into that. What do you have to tell us about this gross profit rollercoaster?

Diane G (07:56):

What is Gross Profit?

In general, “Gross Profit” means that you’re tracking your income and the cost that it takes to produce that income, and that creates Gross Profit. We’ve talked in other episodes about which accounts to use to get you to the Gross Profit line, and then, of course, after Gross Profit, if you were to look at your financials, you’d have all your company overhead and so on.

Matching Income With Expenses

But having your accounts set up in the right way is going to get you to what your gross profit is. Now that said, I’m going to kind of go back to a foundational concept, and that is: we want to be able to match our income and the cost of producing the income.

So if you were to just think of a single job and you were to go out and start that job today, and then you collected the money today, we would have a match. Even if you were in any method of accounting, if you took that money, deposited it in the bank, and counted the costs, you went up and bought materials and paid yourself for that day, that would be a matching concept. We would be able to see the income less the cost to produce the income. Makes sense?

Dave S (09:11):

Makes sense.

Cash Basis Accounting

Diane G (09:12):

OK, good. Now, there are some different methods of accounting that start causing this rollercoaster. So one method of accounting that is suggested by many tax accountants when somebody sets up their business is they say, “Oh, well, let’s just do Cash Basis. Let’s say you’re not collecting money right up front. You don’t want to be paying taxes on the income you don’t have in your hand, so let’s just go ahead; this is really easy; we’ll just set you up with Cash Basis.”

And then the other thing about cash basis is you can kind of manipulate it. You can’t get crazy as far as the IRS is concerned, but when people are Cash Basis, they may pay their bills pretty early and put off receiving income. That eventually all catches up with you. Nevertheless, if you do things on a Cash Basis, you’re going to recognize income when you put the money in the bank, and you’re going to recognize cost when it comes out of your pocket.

Now, you can guess that that might create some swings in your gross profit. Have you seen that with some of your clients?

Accounting vs. Tax Accounting

Dave S (10:24):

Definitely. Let me just jump in here. I think when a contractor hires a CPA, generally (as we talked about the difference between construction and accounting and regular accounting,) they don’t really understand how that works, and they’re looking from a tax standpoint. Now, a tax standpoint is completely different from a managerial standpoint of how we run our business.

Chart of Accounts

This is why it is so important, as the things that we talk about in our business, in our conversations, it’s setting up that Chart of Accounts correctly. Setting your business up so we can manage our business. And that’s different than what you pay in taxes. And I think this is where the problem comes in because CPAs are generally focused on saving you taxes. But if you can’t tell what your business is doing, you can’t tell where you’re going or where you ended up. You don’t have a business. Am I kind of on the right track on this?

Diane G (11:30):

Exactly. The Cash Basis of accounting is going to create very misleading management reports for you.

Dave S (11:37):

That’s generally the way that they set it up. That’s your dry cleaner or your dentist.

Diane G (11:44):

Right. So let’s say we want to get a little closer to being accurate – to get a better “matching” because that concept of getting that matching is what’s going to tell you what’s really truly going on in your business.

Accrual Basis Accounting

So, the next concept that a lot of people are familiar with is the term “accrual.” And the idea is with Accrual Basis accounting; you recognize your income when you invoice someone, when you tell them, “Hey, you owe me some money, I’m going to send you an invoice, and at some point, you will pay me.” But it’s the date of the invoice that creates the income on your books.

And then, on the other hand, if you enter bills (now, you could write a check, so that’s kind of cash basis), but the cost goes on your books at that point.

But you generally are going to enter your bills on the day that you incur the expense.

Diane G (12:45):

So if they bring your materials to your site, they’re going to send you. From their side, it’s an invoice; from our side, it’s a Bill. They’re going to send you a Bill for the day that they delivered the materials to your job site, as an example.

Matching Income and Costs

So then we have a situation where conceptually we have matching. We’re invoicing our work out, and then we’re going to enter our costs when we incur those. That works for a lot of businesses where they have a pretty close approximation of invoicing and delivering. So if you were a manufacturing company and you were invoicing people, there’s a way that your inventory gets costed at the same time that you create the income. So you’ve got your matching there.

However, in matching, the problem there is that you can still get mismatched. Let’s talk about payroll. So maybe you only pay payroll every week or two, but you invoice today for going out and doing a roofing job. But your payroll cost doesn’t hit until a week or two from now.

Diane G (13:51):

So now we’re kind of out of sync – just thinking about a single job, and so we’re not matching anymore at that point.

The other thing is, lots of times, you have contract arrangements that say, “OK, well, at the end of this phase, we’re going to invoice. At the end of another phase, we’re going to invoice.” et cetera. So that’s based on your contract, but it doesn’t necessarily match up with your costs.

So recognizing income when you invoice, recognizing costs, when you put bills, checks, or credit card purchases in the system, that’s all technically Accrual. But it still has issues because, in most cases, people in construction are invoicing ahead or they’re invoicing behind their costs. So, Accrual doesn’t really conquer the problem. It’s certainly better than Cash Basis, but you’re still not getting a good match. So those people that you see that are having these rollercoaster issues – are a lot of them sending out invoices and entering bills?

Challenges in Matching

Dave S (14:58):

Here’s where we see a lot of problems:

  1. Deposits. You get a deposit from a customer, and we may not do that job for six weeks, but we’ve got this cash sitting here.
  2. The other one is material deliveries. So we may have a job that we’ve fully loaded for the entire job, and let’s say it’s going to take us a month to do it, but we have preloaded that job. So we’ve incurred those costs at that time, and we may not have any income against it. Maybe they haven’t paid us. Maybe we’ve got to pay in 30 days. And this is really the concept of the matching – is that you’re exactly right. If we don’t have this correct, we’re going to see those big swings.

And we’re going to talk about making that adjustment to make everything match. I don’t know if you’re there yet.

Diane G (15:50):

This isn’t happening with just one job for most people. They have multiple jobs going on, so they’re invoicing ahead on some things and invoicing behind on others. And so that income and cost just is not matching up on a job-by-job basis.

Dave S (16:08):

Where we really see it is it happens all the time in commercial work. So those of us that are doing commercial work (as we did) – we always had six or seven jobs going on at one time at different points in their progression. And so that’s where you really see it, and you’ve got to really stay on top of it and understand it, which is why job costing is so important (which I think we’ll probably touch on.)

But you’ve got to have this down. Also, everybody wants to scale their business, they want to grow their business, and so forth. This is the time to understand this concept and set it up correctly so you can grow, and then you’re going to have accurate information to manage your business. And that’s what it all comes down to.

Accrual Basis Accounting – Most Accurate Over Time

Diane G (16:57):

One thing I will say about Accrual accounting is that sooner or later and later – not sooner – when the job is complete, and all of your bills are in, and everybody’s been paid, the Accrual basis of accounting is going to give you an accurate result on that particular job.

But if you were to look at a single job, and we do this when we’re making some special adjustments, and you see that in one month – in just a single job – in one month, you’ve got 67% gross profit, the next month you’ve got a negative 10%. The next month you’ve got 15%.

I mean, it just swings all over the place in Accrual basis accounting. But in the end, there is some saying about, “Well, if you’re not happy with the outcome, then you’re not finished with whatever the process is.

Well, that’s the case with job costing. Yes, sooner or later, you’ll find out how you did, but that’s too late, and you don’t know what’s going on in your company on a month-to-month basis.

Diane G (17:57):

I’m not going to say day-to-day or even week-to-week, but month-to-month, you should know pretty well what you’ve earned on the jobs that you have been performing.

Accounting Adjustments

So, how do we get around that? Well, the old accounting term is “adjustments.” We do some adjustments. We take into account that we don’t have a good match on the books. We have to send out invoices. We want to be putting our bills, our checks, our credit cards, our payroll, labor burden – all of those costs in. We want to get all those things assigned out to jobs, but we’re still not getting a good relationship between income and cost.

And it’s all about relationships. So you think about accounting as just numbers, but there are relationships and trends and things that those numbers will tell you. So let’s talk about how we get that relationship straightened out between your income and your costs so that you can recognize what you’re earning on any given job over the life of the job instead of having all these big ups and downs as you go along.

Dave S (19:06):

Where it really comes in is the last day of the month, and this is where you can really see if you picture a job that you’ve got; you may have front-loaded all the materials, so you’ve got the materials setting up there. Maybe you’ve gotten, say, a 10% deposit; maybe we’re behind on getting paid, but we’ve actually done more of the job. So let’s say we’re 50% complete with that project, but we’ve only gotten that 10%. So all of these are various adjustments, or you have done certain work, but you haven’t paid your subcontractor, for instance.

All of these things are going to throw off your numbers, and we’ve got to have accurate numbers. This gets back to the idea of looking through the windshield as opposed to finding out at the end of the job or the end of the year what your accountant tells you, and you keep your fingers crossed. It’s no way to run a business, guys.

Diane G (20:12):

And as you mentioned, the heart attacks. It can be tough, and if you’re not getting some special things done with your books, they’re not really all that hard, but the concept is that we want to get those numbers lining up, and you don’t have to adjust a bunch of costs. Your costs are your costs. If you’re entering your bills, checks, and credit cards, those are the costs you’re recognizing on your books.


But we do have to work our way backward. Hopefully, we’ve started with an Estimate – a fairly detailed estimate – of what we think we’re going to make on the job (our Income, not our Gross Profit.) But we’re going to charge for the job and what our costs are going to be. So that’s the very first step in conquering that “Gross Profit Rollercoaster,” which is to have an Estimate.

Now, let’s just think about a single job.

Diane G (21:03):

So, let’s say that on your books, you have 25% of your estimated cost, but you’ve only invoiced for maybe 10% of what you intend to invoice for. So what’s that going to do? That’s going to leave you with a Gross Profit Loss. But in fact, you’ve really earned – because you’ve got 25% of your costs on the books – you’ve really earned 25% of your income. But the contract that you have or the client you’re working with – you’re not going to go out and send them (just because it’s technically the last day of the month) – you’re not going to send them another invoice and say, “Hey, I’m evening everything up, and so here’s another invoice.

Instead, we do an adjustment, and I always like to have us make that adjustment on a separate line item in the Income area. In this case, we would add enough dollars to your income so that we have 25% of your anticipated income to match the 25% of your anticipated costs. And that’s going to give you the Gross Profit percentage that you estimated on the front end.

Gross Profit Consistency

Diane G (22:17):

But what if it’s the other way around? You got a bunch of money up front, or you invoiced a lot upfront because you’re going, “Yes, I’m going to have to cover all these costs and so on.” So, let’s say that you got 40% of your anticipated income and only 25% of the costs. Then, you would make an adjustment that would reduce your income down to 25% of your anticipated income. Then, the next month, you kind of go through that same checkpoint. So maybe the next month, you’re at 40% of your anticipated costs. Then, you adjust to get your income to 40% of your anticipated income.

That’s going to keep your Gross Profit percentage level throughout the life of that job. Now, some people have jobs that last two months; some people have jobs that last two years. And so continually checking that, revising your estimate if you need to so that you can keep the income and cost proportional or in relationship to each other, is what will let you see what you’re truly earning over the life of a job.

Now, the little thing in there that you need to be sure that you do is if you’re aware of changes in costs, then you need to go back in and modify your Estimate so that you’re continually checking against your revised Estimate as you move forward.

Work in Process Adjustment (WIP)

Dave S (23:50):

And that adjustment we call the “Work In Progress,” the WIP adjustment.

Diane G (23:54):

No, actually, we would be adjusting your Estimate so that when you’re looking at your estimated costs, your adjusted estimated costs, and actual costs, we keep that proportional throughout the life of the job.

Percentage of Completion

Now, when you adjust the income up or down, you’re right; then it goes into an account – two accounts, actually – on the Balance Sheet. We don’t normally like to use the term “Work In Process” because that’s a little more for spec home builders, custom home builders, and so on. That’s WIP. WIP is a broader term, but Percentage of Completion adjustments generally go into accounts called Overbillings or Underbillings.

So if you’ve underbilled, then that’s kind of like a receivable; it’s just not going to sit in your invoices. If you’ve overbilled, that’s kind of like liability because you may not technically owe that money back, but you’ve overbilled, or you’ve billed more than your proportion of costs.

Diane G (24:56):

So it depends on whether you’ve overbilled somebody or underbilled, and that’s where the income adjustment, the other side of the income adjustment, shows up. So, I’m trying not to get too deep into that whole concept, but I think the big thing on your P & L is that you’re going to be continually adjusting your income each month to match the related costs.

And if your estimates change for known reasons, maybe certain material costs go up dramatically. Of course, we’ve seen it happen once in a while – that they’ll be lower. Generally, they move in a direction that’s not favorable. But then let’s say you started out and said, “Well, I’m planning on making a 30% Gross Profit,” and then some things go sideways. Then you end up saying, “Yes, now we’re slipping. We’re down to a 27% gross profit.” Well, the month that you realize that you are going to show a dip because you’re kind of making up for the life-to-date thing.

So it’s not perfection, but it’s certainly going to give you a much better read on what your business is doing on a month-to-month basis than if you’re not. [Better] than either Cash Basis, which is horrible, or Accrual Basis, which leaves a lot to be desired.

And those regular Percentage of Completion adjustments – you want to do those after everything else is in, and your books are cleaned up. That’s one of the very last adjustments you make.

The Importance of Having an Accounting Coach

Dave S (26:28):

Now, this is what we do as part of our coaching business. We meet every month to review the monthly financial statements, and basically, I can tell what’s going on. And over time, you learn this so you know exactly where you are or if something’s off. So if we’ve had a dip in our Gross Profit for the month, you got to question what happened, and you got to go back and dig into the reason why. Well, did we have a big job that went south? Well, that would explain it, or could we make that adjustment incorrectly? And that’s throwing it off.

And that’s why we have to know – as we go – where we are with those projects. What’s happening – is this job going south? And you need to know about it before you’re finished because once you’re finished, it’s too late to do anything about it. In our case, we would track these just so we knew every week where we were on a job (where it’s Percentage of Completion), where are we, and how much labor have we used. And that’s what we tracked.

Diane G (27:41):

Estimate versus actual – continually monitoring that. And as soon as you see something go off the rails, then you have to decide what to do about it. And that’s whether you can get it back on the track or whether you’ve got to go further down the line and figure out if there is something else that we can do to help get the whole train back on the track.

Pre-Job Conference

Dave S (28:05):

Exactly. And a little off in the weeds, here is why we do a pre-job conference. We have our budgets when we do that, we go out, we have the salesman for the job, we’ve got the foreman that’s going to do the job, and we’ve got our superintendent. Those three would go out there.

And by the time they come off the roof, everybody has to be in agreement on how long that job is going to take. And this is the thing – if you don’t give them, “Here’s what the target is that we’re shooting for” – if they can’t, somebody screwed up. Well, the salesman’s commission’s going to drop. Usually, what happened was that they were too aggressive or too optimistic, and that’s why our superintendent is out there for the referee portion. But we get our job, we have our budget, our Estimate, everybody’s in agreement, and this is what we’re going to shoot for.

Dave S (28:58):

And every week, we would be out there. “OK, are we on target? What’s going on?” And if we found that we were going, “We’ve used 60% of Labor, and we’re only 20% of the job complete,” we would just say, “Hey, time out. We got to regroup and figure out what you can do. This is not working. If we continue on this path, we are going to lose money. What’s going on?

And we would rethink that. Everybody put their heads together, and we’d usually come up with a solution to get that, as you say, “train back on the track,” where we’re making that up. And this is what management is all about – job management. This is why we’re always talking about our job costs, our direct costs, our Gross Profit. These are the controllable day-to-day things that you should be monitoring and staying on top of. And that’s what job management is all about.

Complicated vs. Complex

Diane G (29:57):

Absolutely. No, those Estimates versus Actual. I’ve been listening to some things lately about the difference between “complicated” and “complex.” And the general definition that the people I’ve been listening to talk about is “complicated,” which means that there are a lot of moving parts – but they’re manageable. You can work with them. A car engine is complicated.

“Complex” is two children. It’s totally unpredictable how they’re going to interact, what’s going to happen, what the next thing is going to be. So, in construction, you have a combination of the two things. You’ve got the “complicated” – but the controllable aspects are sitting down and doing the estimate and so on.

But the complex is that teamwork, and the collaboration, and the agreement and then actually having it all happen. So you’ve got really kind of a combination of things going on there. So it just occurred to me while you were talking about it – there are two things going on there. The complicated is saying, “OK, well, here’s what all the job phases are, and here’s how much we think it’s going to cost us and the cost codes and so on.” But the complex part is getting it all working out in the field, monitoring it, and bringing those two sides together: the controllable pieces and people who are sometimes not as controllable.

Dave S (31:28):

And that’s running your business. You have to be able to do that on a day-to-day basis. It’s all about the Gross Profit. And we’re not talking about Net Profit. There’s always that mix-up. And there are businesses doing millions of dollars in business, and they don’t really understand these concepts. It’s amazing.

But over time, it’s not going to be sustainable. You cannot grow a business without having those basic concepts, understanding those, controlling your jobs, making money on every job, and making the Gross Profit that you need to cover all your expenses and make a Net Profit.

Diane G (32:13):

Voila. Otherwise, like you said, “Go work for somebody else.” Then you’ll have Net Profit, right? Because you’ll get a paycheck.

Dave S (32:20):

We’ve got a lot of contractors who should be working for somebody else. You can look at these; you look at the financial statements, their understanding of the financial statements, their unwillingness to learn how the finances work and the numbers, that third leg of our stool – and I can just be the Amazing Kreskin. I can see into the future.

Diane G (32:48):

Hold the envelope up to your head.

Preventing Embezzlement

Dave S (32:50):

Exactly. This guy is not going to be successful. It’s just the odds are against you. You have to learn these things. And we’re just talking about the basic concepts. It’s not complicated. It’s just going through these, reviewing those financial statements. This is why we do what we do – we review these each month so they understand them. And once you go through this – we go through six months – you’re going to have this down. You’re going to have the key performance indicators, the understanding that you need to be able to look at these financial statements and say, “Hey, OK, we’re on track. We’re making money, and we’re not getting embezzled.” OK. I hate seeing contractors getting embezzled and getting all their money stolen because they don’t know how to read their financial statements.

But again, I’m off track. Diane, go ahead.

Investing in Accounting Training

Diane G (33:42):

No, it’s OK. And you don’t have to – if you’re a company owner, it doesn’t mean you need to know how to sit down and enter every bill or enter every invoice or do all the calculations. We have many hours of training available on our site that – if you can find somebody who’s logical, who cares about your company, and is willing to sit down and do some learning – you’d be surprised at how much they come up with as they start working in your financials.

We relatively frequently have bookkeepers contact us and say, “Well, I’m new at the company, but they’re working in this five-year-old version of the software,” or “I’m new at the company, and I can just see this as a big mess. What would you suggest?” And we suggest that they go through the training because construction accounting is “complicated.” But company owners don’t need to get into the more complicated piece as much as they need to be able to do that overview – but have somebody internal who is trustworthy.

And, of course, there are different ways of finding trustworthy people and getting them trained. Don’t just go, “Oh, well, anybody could do this. Just sit down and start punching numbers into the computer” (which is what happens a lot of times.) Sometimes, company owners’ wives are the ones that get drafted, and so many people just don’t have the training. And even people who have accounting degrees don’t necessarily understand the complexities of construction or job costing.

Dave S (35:24):

That’s the CPAs that we’re relying on. We talk about the training that goes into it. When you think about it that concept, our business is that three-legged stool. It covers everything, and you spend so much time and effort thinking about, “Oh, I’ve just got to sell more work, sell more work.” So you have no problem perhaps investing in sales. OK, well, that’s just one leg of the stool, or I’m going to put training. And contractors don’t put enough training or enough education into their production end. You got to sell work. You got to do work. So, in the “do work” portion, you’re not educating your field people.

But particularly when it comes to accounting, you have to invest. First, you have to get good people that understand this. So you’re getting good numbers in, and you are getting good reports back. Because you are looking at reports, you’re looking at KPIs. Once you have your dashboard set up correctly – we do that for you, by the way. You set up the dashboard so you can look at that quickly and be able to know what’s going on. It’s like the dashboard in your car. If you’re driving cross country and you’ve got duct tape across all your gauges, you don’t know what the heck’s going on or where you’re going. It’s the same thing.

Diane G (36:52):

When you’re going to run out of gas.

Dave S (36:54):

Exactly. Exactly. “Oops, Hey, don’t have any cash. What happened?” So yes, you’ve got to have this reporting. So shall we talk about some of these classes that you’ve got, Diane? Because we’ve got a number of our contractors that are in there, and they are learning. They understand it, and it’s the greatest thing that they’ve done for their business.

The Construction Accounting and Management Program

Diane G (37:17):

Sure. Well, I do have one program called the Construction Accounting and Management Program, and that has 90 plus classes, and they’re not five-minute classes. They’re in-depth. I’ve put them all together myself. We have handouts, procedures, and videos. It’s really designed to help anybody regardless of their level of expertise because we do have different levels within each of the major areas. So we do have that available. It’s on a subscription basis. You can take it month to month, or you get two months free if you sign up for the annual program.

Our new VIP program, we’ve just revised it. It used to be if you were in that program, you’d get half an hour a month, one-to-one with me or another one of our ProAdvisors. And we’ve changed it so that instead of having a one-hour webinar per month. (There are actually 27 of them sitting out there, recorded and transcribed.)

Diane G (38:16):

But I said, let’s just give people in the VIP program an extra half hour or so. If you’re in the VIP program, you get an hour per month with me, where we look at your computer and resolve your specific issues. So this is something that we really put in place over the last few weeks. So the VIP program does have that extra value of one-to-one handholding and coaching and whatever we can do to help you as part of the VIP program. And then the VIP program has some other benefits, those extra classes and some extra products that we have available.

Percentage of Completion Analyzer

Additionally, we do have a Percentage of Completion Analyzer that will actually, when you drop your numbers, your open jobs, and your numbers in life-to-date numbers and your estimates, it will compute your adjustments and actually give you a journal entry that says, here’s the entry that you make. And then turn around and reverse.

Diane G (39:21):

So we’ve given you that tool. We’ve got many other tools. We have a pre-done construction template for people who use QuickBooks Desktop. And as I mentioned, we also have a lot of other giveaways.

Now, if people don’t want to get into the month-to-month program that has all the classes, we do have some standalone classes, and we’ll provide those links for you. When you publish the video or the audio in your podcast, you’ll have those links so people can come through.

Oh, and one of the things, David, I think you’ve mentioned this in other podcasts: we have something called a Tale of Four Companies where we go through and move through – here’s this person who has this level of detail. And then, it builds out to the person who has a full-blown controlled financial system with the kinds of reports that they need to help make their company more profitable.

Dave S (40:19):

That’s something that everybody should get. It’s an ebook with simple, easy terms, free, and easy to understand to give you some of these concepts. Exactly. And we have that link.

Diane G (40:35):

Think it’s Tale of Four Companies. I’ll tell you what; I’ll give you the link a little later. I think it’s BuildYourNumbers.com/dave. Does that sound familiar?

Dave S (40:47):

Yes, that sounds about right. But yes, you all have all of these links, and some of these standalones are great. The CAMP program that you have, we’ve got a number of contractors that are in there. They love it. That’s a great one. And you got all kinds of stuff. I mean, just go to your website and read some of the blog articles. I mean, there’s everything. Like I say, it’s like asking Google; it’s got everything in there, and you need to become educated on this.

I can’t stress how important it is to know your numbers. You hear about all the guys out there talking about “You’ve got to know your numbers.” Well, this is exactly what we’re talking about. These are the numbers that you need to know. It’s not that complicated! But get some education.

And Diane, I think that’s a wrap. Do you have anything else that we want to add to that?

Diane G (41:33):

Well, I can’t think of anything else. We’ll provide all sorts of links for people to take a look at specific things. But yes, just go out and wend your way around and through the BuildYourNumbers.com website, and I think you’ll find all sorts of things that will be helpful for you.

Dave S (41:54):

Get educated. You have to spend time, invest time in yourself, learn these things, and invest time, invest in your people and anybody in your bookkeeping and accounting. Get them hooked up with their CAMP program. I mean, it’s great.

So Diane, as always, I really appreciate you coming on. As always, I learned a ton. And also, I’ll have the links for these past shows because all of them are great. You’ve been on half a dozen times or so, and we will continue to get you on. And we’ll bang away again at that third leg. Keep that third leg strong.

Diane G (42:32):

OK! We’ll keep peeling back the layers of the onion as we move forward.

Dave S (42:38):

Look forward to it. All right, Diane, thanks so much. We’ll see you soon.

Diane G (42:41):

OK, thanks, Dave.


  • Click the following link to learn more about Dave Sullivan and The Roofer Show podcast. It’s the podcast that helps roofing contractors grow their businesses, make more money, and have more free time!
  • Discover the Info Plus tool that helps you see more about your month-to-month profitability!
    The Percentage of Completion Analyzer helps you easily create Percentage of Completion calculations and adjustments.
    Click the link above for more info – or for further assistance, contact us at 734-544-7620 (9-5 Eastern, M-F).

Customer Praise For Diane Gilson, Info Plus Accounting, and BuildYourNumbers.com

⭐⭐⭐⭐⭐ From the Intuit FindAProAdvisor website:
“Diane has been working with our remodeling company for over 10 years. She is extremely helpful, professional, and a pleasure to work with. Her knowledge of QuickBooks seems endless at times, and no matter what QuickBooks-related question or issue I have, she always has an answer for me.

Initially, Diane helped us set up our chart of accounts and lists within QuickBooks so that our reports were accurate and made sense. She patiently trained me how to create accurate P&L’s, Balance Sheets, and Job Cost Reports (as well as how to understand them!).

Diane also taught me how to use the WIP (Work-In-Progress) Report, and how to enter those numbers into QuickBooks as a Percentage of Completion entry. This allows us to see where we really stand each month with regards to our sales & profit.

Another big area she helped me with was our Labor Burden. Her Labor Burden Calculator is worth every penny and then some! Diane showed me how to enter the information into the calculator to see what our employees are really costing us, and then how to assign the fully burdened labor costs out to our jobs within QuickBooks.

I especially like how Diane can work with me remotely by using a WebEx connection – she is able to connect to my computer and we can both work together on it. This saves us both time & money. I would highly recommend Diane Gilson to anyone who is using QuickBooks and needs support, training, or set-up help. The assistance that you receive will be invaluable!”

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