Transcript:
As a business leader, having the information necessary to understand what’s actually going on with your business is obviously extremely important, both in making decisions and in understanding where you’re at today and what changes you need to make.
When you have two different systems, like QuickBooks and Buildertrend or any other system with financials, you might often run into an issue where one system says one thing and another system says something else. What that can lead to for you as an owner is only listening to one of them, maybe a hodgepodge of both, or just giving up on understanding that information.
Typically, when you’re looking at financials versus Buildertrend, it can be pretty common that the numbers will be different, because the reports you’re looking at are telling different things. They’re not supposed to be telling you the same thing. Reports within Buildertrend are going to tell you about the profitability of each individual job, and there can be multiple things that roll up into that. You want to make sure you have processes in place for capturing change orders, capturing expenses through bills and accounts payable, and capturing ad hoc credit card expenses. Any overhead allocation needs to be captured as well. Otherwise, you’re only getting a piece of the story through your job profitability reports in Buildertrend.
If you have your financials connected to a system such as QuickBooks, you might also be able to run a job profitability report out of there. Or you might be trying to compare the two: each individual job’s profitability through Buildertrend, and how your company is doing overall through QuickBooks.
In the first case, if you’re trying to compare apples to apples at the project level, one difference you might find is that your financial operations team is capturing data one way through QuickBooks. You might have expense reporting connected there, or you might be doing overhead allocations there, but not in a way that feeds back into the Buildertrend integration. How that’s set up is obviously a big piece of this, so make sure it actually is set up and being used appropriately. Wherever your team is working, you want to make sure that both you as a manager and your project managers are getting all the information they need. You don’t want a back office that’s capturing data one way but not communicating with your front office operations, the guys on the ground making the actual decisions.
Another scenario is when you’re looking at all of your jobs individually and they seem to be profitable, but then you go to the financial statements from your accounting system or your accountant, and they show that you’re not profitable. The reason for that could be a list of things. It could be that you’re incurring costs on your financials that aren’t being tagged to jobs, but should be. That’s pretty common for us to see, especially around expense reporting, where credit card expenses aren’t being captured in a way that passes through to jobs. They’re just being absorbed by the business, which effectively means they’re getting lost in your margins. Your company is eating the cost, and it may not be accounted for in what you bill your clients or in how you bid future jobs.
A few other reasons come down to understanding the accounting practices of your financial operations team. Who’s generating the financial reports? Again, you want to make sure the structure they use is in alignment with how your team actually operates and reads the financial statements. That’s a huge piece of having an accountant or a partner handling your financial operations: they should be taking that into consideration. They’re not just doing data entry for the sake of data entry; they’re using it as a feedback loop, so that how they enter the data and how it’s reflected lines up with how it’s being read by the people using it. That can mean your financial operations team is doing things like accruals, where the work has been done but may not have been billed yet, which can cause a timing difference.
Or conversely, maybe you’ve invoiced somebody a little too early, and it’s showing up as revenue even though they haven’t actually paid it. In Buildertrend, that might not show up because it hasn’t actually occurred yet; it’s in the future. But in QuickBooks or your financials, it may already be hitting. The difference between the two can simply be a timing difference.
Another reason can be that your overhead isn’t being allocated the same way between the systems. You might have a journal entry or some other transaction on the financial operations side that allocates certain costs so they’re reflected in your gross margin through the cost of goods sold section, but they’re not being tagged to individual jobs. Because of that, they’re not flowing to any project profitability report you might be looking at.
So what can you do as an owner? It’s important that you understand what’s going on with your business, and oftentimes you’re going to know better than your financial operations team what’s actually going into every job. You should be able to point out all the different pieces, including costs, revenues, change orders, and every other data or financial input, that they need to account for, and make sure you have the systems necessary to capture it appropriately.
A lot of times, you might have an accountant who knows there are expenses that need to be applied to jobs, but if your operations team doesn’t have a way to capture that data and feed it to the back end, it’s going to be very difficult without someone individually following up. And on the front end, your operations team isn’t going to want to deal with red tape and compliance work like expense reports any more than they have to. That’s why, in my experience, it’s really important to make that process as seamless as possible. Data capture is a critical part of the foundation for scaling a business.
Other issues can come from bills that have been entered in one system but not the other. Typically, they should flow through, but if you don’t have an integration that ties the two together and fully captures everything in both, you’re going to be missing data in one place or the other.
In the end, as an owner, you shouldn’t necessarily expect the financial reports in Buildertrend to match one to one with the reports coming out of your accounting system. But it is extremely important to have someone who can explain those differences and easily point out the cause, whether it’s certain costs going to overhead, integration issues, or process updates that should be implemented to connect the two. There should never be a guessing game with whoever is managing your financial operations about which report is correct and which one isn’t.
So if you’re ever in that situation, looking at two different reports with data that doesn’t align and not knowing which one is true, you can always reach out to Nimbl. We’ll do a free assessment for you, give you our input on the challenges or issues we see, and offer some recommendations to make things better.
