General Contractors using QuickBooks will have by far the most complex job costing needs. Tracking the cost of specialized equipment, subcontracts, multiple prevailing wage rates, and retainage in addition to overhead costs, employees, materials and labor charges.
Estimating and Job Costing needs will vary depending on the type of contractor you will be dealing with, so if anyone dares to suggest that one “Chart of Accounts or bookkeeping method” will work for all contractors – well you just shouldn’t listen to them
Meet Gerry the General Contractor:
“Gerry’s” usually have the same basic philosophy as Sam the Subcontractor; however, because they have more employees, subcontractors, and bigger “operations” they realize that they need to consider more things when they go out to bid on a job; but they do not always realize all of what they need to take into consideration nor do they always know how to use QuickBooks efficiently.
Gerry has overhead costs, employees, specialized equipment, company vehicles, materials, subcontractors, retainage, percentage of completion billing, and more that he needs to take into consideration when estimating. He works mostly on prevailing wage jobs, where he has to pay his employees a much higher rate of pay plus fringe benefits with a few private jobs – he isn’t a union shop; so he is paying the prevailing wage fringe benefits in cash to his employees. Billing requirements for his jobs include Time & Materials and Percentage of Completion, where he needs to submit AIA billing forms and track retainage that he is owed and retainage he owes his subcontractors.
Gerry tells you that he was just awarded several contracts on an ARRA funded construction – in some instances he will be the General Contractor and on other jobs he will be a subcontractor, these jobs will last anywhere from 1 to 3 years, and he has to submit certified payroll reports, monthly ARRA reports, and AIA format billings. Gerry will need to hire 25 additional employees – including 2 project manages/estimators, is working with 10 new subcontractors, 3 new project owners, and will be required to submit his certified payroll reports electronically for 3 of the new jobs. He is nervous about how he and his bookkeeper will manage. He offers his employees health insurance – with the company paying a portion of the monthly premiums and contributes to a pension plan on their behalf. His workers’ comp and general liability insurance premiums are outrageous, because he is paying his prevailing wage fringes in cash, and with new employees, he wants to be prepared.
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TIP: Investigate to see if Gerry is able to take credit against the entire prevailing wage fringe benefit package for company contributions made to employee health insurance and pension plans. If he is able to take credit, make sure that he is actually taking the credit and therefore reducing the full cash fringe amount. This will help to reduce his General Liability and Worker’s Compensation costs, especially if they are based on gross payroll instead of gross sales. Request our free eBook on 4 Ways Contractors Pay Prevailing Wage Fringe Benefits. |
Gerry has QuickBooks Pro 2009 and a full-time bookkeeper. They use QuickBooks to run payroll, do Estimates, and job costing. They have been using the QuickBooks built-in certified payroll report – but they have to do a lot of manual adjustments to make them meet requirements, and Excel to do his ARRA reports, AIA Billings, and to track subcontracts and equipment costs. He knows that they could be using QuickBooks more efficiently – but do not know how to make changes – he is also not positive that the reports he is getting from QuickBooks are accurate or include “everything”.
As Gerry’s ProAdvisor or CPA, you should first do a general review of their QuickBooks file and help him identify areas for improvement and then implement new procedures.
You will find that Gerry is going to be more than willing to make changes; his bookkeeper on the other hand could present another problem.
A basic plan of action for Gerry and his bookkeeper would be to:
- Move his Excel based tasks into QuickBooks
- Review the QuickBooks Item List and make any necessary changes
- Review the existing Job Costing methods
- Review their existing Time & Materials Billing methods
- Run existing Estimate vs. Actual Reports and drill down into the details to find potentially missing costs
- Review Payroll methods, making sure that payroll is being job costed correctly
- Teach Gerry and his bookkeeper to use Purchase Orders to track material purchases and Subcontracts
- Implement Workers Comp and General Liability tracking
- Implement Vehicle and Equipment Costing procedures
- Implement a Retainage Tracking system
- Research ways in which to lower General Liability and Worker’s Compensation costs
- Implement QuickBooks integrated applications to deal with AIA Billing and all aspects of Certified Payroll, ARRA Reporting, and electronic submission
Gerry is very concerned and is becoming increasingly agitated and his bookkeeper is feeling very overwhelmed and out of her element – but will not admit it. Gerry will probably want to hire you for on-going review of his QuickBooks file and to provide training for his bookkeeper, just to make sure that “things” are being done right. The bookkeeper on the other hand, knows that she is over her head and needs training – but is resentful.
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Gerry and his bookkeeper would benefit from automating certified payroll and AIA billing requirements. Request a FREE 30-day trial of Certified Payroll Solution and/or Construction Application for Payment Solution by Sunburst Software Solutions, Inc. |
An infusion of federal infrastructure funding through the American Recovery and Reinvestment Act (ARRA) have had and will continue to put more contractors and their employees back to work. Federal investment in Public Works projects will create jobs throughout the country and not just construction jobs.
While additional public infrastructure projects will allow the construction industry to maintain their current workforce and will even necessitate hiring more workers. You will also see contractors who have previously worked on other types of construction projects (residential and/or commercial) begin bidding on newly created Public Works projects.
This will also encourage contractors to purchase equipment, thus preserving and creating manufacturing jobs.
As a Certified QuickBooks ProAdvisor or Accounting Professional who is working with construction clients – you are entering into a very challenging experience!
More demand for construction savvy accounting professionals.
Contractors who will perform work on these government funded public works construction projects will face new bookkeeping, accounting, and compliance issues that they may not have faced before, therefore, they will be seeking help and advice (aka consulting time) from construction savvy accounting professionals who support QuickBooks – specificically in the areas of improved job costing and the preparation and submission of certified payroll reports; which are required on government funded construction projects valued over $2,000.00.
The terms “construction and contractors” are vague and widely misused terms which cover everyone from the local handyman who makes repairs/improvements on your house to the contractor who is building or repairing a bridge on your local highway.
Let’s talk about construction projects
In general, there are three types of construction projects that contractors can be involved in, each having their own unique accounting and compliance issues:
- Non-Residential Building which includes the actual process of building, creating, or repairing commercial, manufacturing, educational, religious, administrative, recreational, hotel, dormitory, and other actual buildings. These types of project may require the submission of AIA format billings and/or certfied payroll reports – in order for the contractor to be paid.
- Residential Building which includes the actual process of building, creating, or repairing single family homes, multi-family homes, and apartments and other buildings of this nature. These types of projects may require the submission of AIA format billings – in order for the contractor to be paid.
- Heavy/Highway, Industrial, or Non Building construction which includes the building or repair of streets, highways, bridges, dams, reservoirs, river and harbor developments, sewage and water supply systems, missile and space facilities, airports, utilities, public works projects, and communication systems; just to name a few. These types of projects may require the submission of AIA format billings and/or certified payroll reports – in order for the contractor to be paid.
AIA format billing is a “standardized” method of billing developed by the American Institute of Architects.
From Engineering News-Record
The $8 billion the U.S. Dept. of Transportation awarded in January for high-speed rail was a dramatic move, but it is far from a one-shot deal. DOT now is preparing to seek proposals for a new batch of rail grants, totaling more than $2.3 billion. If the first round, funded through the American Recovery and Reinvestment Act, is any indicator, the next competition will attract a throng of applicants.
Karen Rae, deputy chief of DOT’s Federal Railroad Administration, says, “It’s a very new game. I think the one thing we know is the pent-up demand was huge.” Indeed, the ARRA round drew high-speed rail (HSR) proposals totaling $57 billion for the $8 billion available.
The next round will start with a “notice of funding availability,” which Rae says will be issued probably in late spring. Rae says slightly more than $2.1 billion will go for corridor projects and $245 million for specific rail projects. The ARRA money was 100% federal funds. But the new round will adhere to requirements in the 2008 Passenger Rail Investment and Improvement Act, including a 20% non-federal matching share.
While gearing up for the new wave of applications, FRA on April 1 published a funding-availability notice for $115 million for HSR planning, design and construction. Rae says, “We heard from many, many states that this is brand-new. They needed money for planning to get everything up to speed.” Those funds are from 2009 and 2010 appropriations and carry a state matching requirement.
FRA also is starting to cut checks to states that won the $8 billion in ARRA aid. Rae hopes to deliver those projects “in half the time you could get any other major projects out.” Some of the money will go to individual, ready-to-go projects and some for “early work” on corridors, she adds.
“The momentum seems to be building,” says Al Engel, AECOM vice president and U.S. high-speed-rail director. Industry surely welcomes all the funding approved so far. But, Engel adds, “Much more money has to come to the table to make this a real business.”
In looking at HSR, Kevin J. McMahon, group vice president for North America infrastructure at Jacobs, Pasadena, Calif., is reminded of the Interstate highway
The American Recovery and Reinvestment Act of 2009 (ARRA), provides the State Departments of Transportation and Federal Lands Agencies with $27.5 billion for highway infrastructure investment.
With this money there also comes an increased level of reporting, which we will be adding to Certified Payroll Solution to better and more fully serve the needs of our customers who may be working on these types of construction projects.
ARRA Reports include:
- Monthly Employment Report – Form FHWA-1589
- Monthly Recipient Project Status Report – Form FHWA-1585 (a summary report in addition to FHWA-1589)
- Initial ARRA Project Plan – Form FHWA-1586 (a summary report in addition to FHWA-1589)
- Monthly Summary Employment Report – Form FHWA-1587 (a summary report in addition to FHWA-1589)
- Periodic Grouped Project Report – Form FHWA-1588 (a summary report in addition to FHWA-1589)
Watch for further updates in the next couple of weeks regarding the release of an update to Certified Payroll Solution which will provide these forms.
In the meantime, download a copy of the reporting requirements.
Also be sure to visit the Federal Highway Administration’s Question & Answer page (looks like it’s updated frequently) for Questions & Answers on American Recovery and Reinvestment Act of 2009 that have been raised by State DOT’s, by clicking here.
