Advice Archives - Moose Creek Bookkeeping, LLC

As a business owner or manager, it’s essential to stay on top of your company’s financial health. Wouldn’t it be great if there was one report that could give you a high-level overview of the books so you can make smart financial decisions for the future? Well, there is! We present The Balance Sheet. (ta-da!)

While it’s not a novel idea, a balance sheet is one of the reports that are crucial to understanding. At Moose Creek Bookkeeping we have been translating accounting reports for clients for over 30 years, combined. So, if you still have questions after reading this quick article, please reach out for a free discovery call.

Balance sheets give you a clear picture of your business’s financial position at a chosen time in the past. They can help you make smart decisions about future investments, loans, or other financial activities. It can also tell you if you have enough cash on hand to meet your obligations, or if your interest rates are too high to maintain.

A balance sheet is typically divided into three sections:

Assets are what your company owns, including cash, inventory, equipment, and property. This information is helpful in assessing your company’s liquidity, as well as its ability to invest in new projects.

Liabilities are what your company owes to others, including loans, accounts payable, and taxes. This information is vital in understanding your company’s debt levels and interest rates.

Equity represents the leftover interest in the assets of your company after deducting liabilities. This information is important if you plan to attract investors.

Reading a balance sheet may seem intimidating at first, but it’s not as complicated as it looks. Here are the steps to follow:

1. Look at the assets section: You’ll see categories like cash, accounts receivable, inventory, and property. Add up all the assets to get your total.

1. Look at the liabilities section: This section lists everything your company owes, like loans and accounts payable. Add up all the Liabilities.

1. Look at the equity section: This section lists how much money you and any other investors have put into the company. Add it up!

Check the equation: The balance sheet equation is assets = liabilities + equity. By nature, a balance sheet should always balance. If it doesn’t, it’s likely due to missing or incorrect data. Don’t worry! This is common for many of our new clients; we are able to help right your ship.

Your company’s accounting software should make running a balance sheet report a breeze. If you need further help to understand your reports, Moose Creek Bookkeeping is here to help. We take pride in what we do and our clients benefit from it. Reach out today with any questions you might have.

Understanding Your P&L Statement

Today, we’d like to discuss how Moose Creek Bookkeeping services can help your business achieve financial understanding in 2023 and beyond. Every business owner knows how important it is to stay on top of the financials – but two important factors often get in the way of accurate bookkeeping: organization and understanding. In our previous blog posts, we talked about how Moose Creek Bookkeeping can help you maintain organization regarding paperwork, receipts, etc. Now, let’s talk about understanding the most crucial report your accounting software* can generate: Profit & Loss Statement (Aka P&L or Income Statement).

Your P&L statement is a financial report that shows your business’s revenue, costs, expenses, and profit. This information is incredibly valuable – it can help you identify areas where you can cut costs and improve your profitability. Without this information, it’s easy to make uninformed decisions that negatively impact your bottom line.

Let’s break it down. Simply speaking, your P&L is calculated as  Income – Expenses = Profit. Depending on the nature of your business, this can be relatively basic, or mind-numbingly complex, and that’s why we are here to help.

Here are the basic categories you will see on a P&L

Revenue: Revenue also called the “top line” of the P&L, is the money that you’re bringing in from your sales.

Cost of Goods Sold: These are the costs that you incur when you make your products or deliver your services.

Gross margin: Gross margin tells you how much money you have left over to cover your expenses after you’ve covered the cost of the product or service you are selling.

Operating expenses: Operating expenses cover all of the expenses that you incur to keep your doors open, excluding your direct costs of goods as above.

Net profit: This is your “bottom line” that you hear so much about. You started with your revenue as your “top line” and then subtracted things as you went: direct costs, operating expenses, and so on. What’s leftover is your profit, or potentially your loss if you ended up spending more than you earned.

Now, your company might fall somewhere between the basic and the mind-numbingly complex when it comes to P&L reports, but either way, we have you covered. Most of our clients are not massive companies with CFOs and Shareholders to scrutinize the books, so we are here to take the deep dive that so many companies are missing out on. Let Moose Creek Bookkeeping guide you through the complexities of financial reports, identify potential issues and offer solutions to improve your business’s current and future financial health. Please give us a call or schedule a free discovery call.

*If you’re reading this and you currently do not utilize accounting software, please reach out so we can discuss some of our recommended platforms for your unique business.

Cash Flow Management

Welcome back to your friendly and informative Moose Creek accounting blog! We are here to share an accounting concept that seems simple on the surface, but it is actually quite complex and vital to the health and future of your business. We’re talking about Cash Flow Management.

Sounds easy, right? Well, that assumption can quickly put your business in deep water in many ways. Without the proper cash flow management plan, your company is more likely to sink than swim. If you’re confused about what cash flow and cash flow management are, stay tuned – you’re not alone. Even big name companies such as K-mart and Toys-R-Us have fallen victim to poor cash flow management. Not to worry! We are here to help.

What is Cash Flow?  Simply stated is the movement of money coming in (income) and going out (expenditures). Think of it as the ebb and flow of the coastal tides where we also see large high and low tides. This fluctuation is normal however if you see a trend of too much low tide, your dealing with a negative cash flow and that can be detrimental. Cash Flow Management covers all the tracking and procedures involved with keeping an eye on your cash flow, to ensure it’s positive. We will cover some of the main issues that cause negative cash flow and how to remedy poor practices, to turn the tides on your business.

• Low cash inflow is a large culprit to negative cash flow. Your customers may owe you money, but perhaps they are bad at paying on time, or you have set your payment due date too far out. This can be remedied by invoicing often, incentivizing early payment, and penalizing late payment.
• Over-paying for goods and services can also affect your cash flow. Always shop for the best prices to reduce your overall outflow.
• Accurately track change orders and variations quickly. With QuickBooks Online (our specialty) you are able to track and create change orders, as well as run complete cash flow reports while in the field. There is no reason to drive back to the office to create a change order, wasting precious time (and fuel).

There are a handful of other procedures and habits that can help your company succeed by creating consistent positive cash flow. Some other remedies include fancy S-curve algorithms which can tell you the future cash flow for each individual job.

At Moose Creek Bookkeeping our goal is to help you understand cash flow and how it works specifically for YOUR business, predict future income and expenses for each job, and teach you best practices and procedures for future positive cash flow. With proper cash flow management, we can predict the future health of your business as accurately as we can predict our tides. Utilizing our vast knowledge of QuickBooks Online and its incredible forecasting tools, Moose Creek Bookkeeping is able to right your ship and have you sailing into the sunset, in the black.

Retainage and How it Works

Welcome back to our blog! This month we wanted to talk to you about a topic that comes up frequently when discussing best accounting practices. As many of our clients are contractors, we are often approached with the biggest accounting head-scratcher in the industry: Retainage. Although a simple concept, proper record keeping can be tricky without the right knowledge.

Retainage is the amount of money withheld from a contractor by a customer which is paid upon completion of the job. During multi-phase construction jobs where payments are made incrementally, a percentage will be retained on each invoice. This practice dates back decades and was implemented to protect customers as a pseudo “reverse security deposit”. You, like your clients, expect each job to be completed on time and to standards laid out in any contract. It is a way to ensure that jobs are finished to satisfaction and protects the customer against unfinished or unsatisfactory work.

Retainage amount typically ranges from 5% – 10%, meaning it can also cut into your profit margin and upfront costs. Since it is usually standard practice in the construction industry, it’s important that you understand it and know how to account for it properly from day one.

Laws regarding retainage and prompt payment vary by state so the first step is to become educated about your state policies. This will help you negotiate the strongest contract possible. Become familiar with mechanic lien laws in your state as well, as these can help you collect retainage fees that go unpaid.

At Moose Creek we are knowledgeable when it comes to retainage accounting. It can be quite the feat to set up QuickBooks Online for retainage properly without the right guidance, but Quickbooks Online is one of the best accounting platforms for tracking retainage. Common sense says that the retainage amount should be entered into the accounts receivable column; this is a very common (and sometimes costly) mistake. Quickbooks Online has a host of customizable features and accounts that can be added to meet your specific company needs. As a contractor, you may benefit from applying retainage to your subcontractors as well. We can assist in retainage accounting when you are the customer or the contractor. Please reach out any time so we can discuss your company’s accounting needs. We treat every client with respect and we will never make you feel bad for past accounting mistakes you have made. We learn by our errors and Moose Creek is ready to help get you back on track with confidence in your books.

QuickBooks Online: Our Expertise at your Fingertips

Is your business ready to take the next step in records keeping? Bring your accountant on the road and on-site with QuickBooks Online. Featuring cloud-based software (SaaS), QuickBooks Online allows up to 25 remote users, features a user-friendly mobile app, and seamlessly pairs with many applications such as PayPal, Square, American Express, Knowify, Buildertrend and CoConstruct, just to name a few.

Here at Moose Creek Bookkeeping, we specialize in helping small to medium-sized businesses get set up properly with QuickBooks Online. With over 15 years of combined experience, we know all the ins and outs of both QuickBooks Desktop and Online. Our clients that have migrated from the Desktop version to the Online version are incredibly happy with the power it gives them in the field. When using online version, you can manage estimates, change orders, payroll, payments & billing, from anywhere! All you need is an internet connection.

Many of our clients have been comfortable using their “old way” of record keeping yet their business is growing and they are hoping to improve their record keeping, invoicing and customer connections with a new and updated method.

A common issue we see with our clients is that they feel they can learn their accounting software as they go. This is not advisable, especially when dealing with job costing and similar variable professions such as contractors, and landscapers. There are several ways to perform job costing with QuickBooks Online, let us show you how to set it up properly from day one, to prevent any errors. Two other helpful features for contractors are being able to track employee time by project as well as sending out recurring invoice emails. QuickBooks Online is a treasure trove of awesome features, that when used correctly can streamline your entire career.

Our goal when helping clients is to reduce the amount of time they spend on tracking expenses, organizing receipts, and entering data. We want our clients to be able to focus on their craft and increase revenue.

Moose Creek Bookkeeping is ready and able to guide you through the best accounting practices, keeping accurate records, preparing for taxes and understanding your bottom line, all with mobile QuickBooks Online, the best in the field.

Moose Creek Bookkeeping specializes in construction billing of all kinds. If you are in the construction business and are scratching your head on the best way to charge your clients, both large and small, you’re not alone. As we discussed in previous blog posts, keeping detailed accounts of all your costs is a critical yet daunting task. Proper documentation is the key to getting paid.

Your business might just be picking up speed and you’re looking for help on how to reign in some lost revenue, or perhaps you’re considering selling your business and moving to a tropical island and want to make sure the books are all shipshape for the new owner. Whatever your business status, we are able to help you create the most accurate bookkeeping procedures YTD.

One of the main reasons such strict bookkeeping is essential in construction billing is because it’s not as cut and dry as in other industries. Jobs can take extensive time to finish, costs can go up or down over the course of the job, and each project is custom. Now, that’s not to say Fixed Priced Billing isn’t used in construction, it’s just typically reserved for smaller jobs that tend to all be the same. For example, let’s say your company specializes in tiny homes and you have just 3 models to choose from. Your company knows exactly what each home costs and can price accordingly. The site prep might look different for each property but the construction project itself is fairly straightforward, and so are the charges to your client. However, Fixed Price Billing can be risky to the contractor because any overruns could not be covered by the customer.

Now, let’s take a look at a Custom Tiny Home. Even though it’s still a small project, the costs would vary greatly throughout the project. This type of project would benefit from the Time and Materials Billing method. This is a very transparent billing format where the customer is aware of everything (even markups) so adjustments and changes can be made by the customer or team.

Some drawbacks to the Time and Materials Billing method is that it does require extensive documentation, if a receipt is lost – that cost is also lost. Moose Creek specializes in helping keep you organized so this doesn’t happen.

There is a third type of Specialized Construction Billing that can benefit both parties greatly and is very commonly used; Progress Billing. This method works well for large projects with many stages. Approval of each stage of the job is done by the client, then payment is made. For example, once the foundation is poured, payment is made. Then another payment is made when the siding goes up, then the roof and so on.  This method is beneficial to both client and contractor because it shields them from typical end-of-the-job problems just as the dreaded non-payment. If the client chooses to not pay at a given stage, the construction stops. Alternatively, if the client isn’t satisfied with the job, adjustments can be made early, rather than late. Progress Billing is a great alternative to your standard 50% now and 50% upon completion.

Regardless of which stage your business is in, Moose Creek Bookkeeping can help you organize your records and help guide you through which of the many Construction Billing Methods (there are more!) works best for your business. Schedule your call today!