All posts by Nate Joy

About Nate Joy

Nate is the Co-founder and Owner along with his wife Terra. Nate joined the team full-time in Spring 2017 with 10+ years of Project Management/Business Analysis experience. He works with clients on process improvement and software implementation.

Case Study #1: The Fast-Growing General Contractor

My favorite thing about running a small business is the opportunity to work with business owners, each with their own unique set of challenges. At Joy Accounting, we don’t just focus on getting books straight (although that is important!); we also replace sub-optimal business processes and create new ones, suggest and implement technology solutions, and work with our clients every step of the way to ensure people, process, and technology are all in sync.

In other words, while we certainly focus on the important metrics (revenue, profitability, etc.), we spend a lot of time getting to the root of WHY the metrics are what they are. Oftentimes we find that a few small process tweaks paired with the perfect technology leads to vast improvements, and can completely make the difference between ‘barely making it’ and ‘thriving’.

To illustrate this point, in the coming months we will be providing short case studies to show how we design solutions based on the unique requirements of our clients. We’ll start with our largest General Contractor, which we’ll rather uncreatively refer to as ‘Bob the GC’ for the remainder of the post.

The Fast-Growing General Contractor

Setting the Scene: Bob the GC discovered Joy Accounting within the first year of starting his contracting business. In this case, we had the opportunity to design the solution from the ground up instead of analyzing existing processes.

Bob was also unique because of the scale he was quickly looking to reach. His plan was to scale from virtually zero in revenue to $10 million USD in the first year, on up to $30 million in the second year. This is larger than our typical client and represented a challenge for Joy Accounting. How could we provide the entire back-end accounting solution at such a scale and ensure our client wouldn’t miss a beat? Before we got to the ‘how’, we needed to understand Bob’s core issues.

The Issues: Some initial discussions revealed that there were a host of challenges Bob would have as he scaled up his business, as follows:

  • Tracking and ensuring proper approval and timely payment for change orders
  • Managing the bidding process
  • Bringing order to the unwieldy monthly draw process, ultimately ensuring everyone is paid on time for completed work
  • Finding a project management system that would track everything and leverage repeatable processes in a way that would save time
  • Designing an accounting solution that would accurately track things like labor costs, receipts, etc. while receiving funds and providing payment in a timely manner
  • On-going CFO-level guidance and direction

After understanding the issues, it quickly became clear that the client needed an end-to-end business solution, not just an ‘accounting’ solution. Joy Accounting was more than ready to meet the need!

Designing the Solution

  • Technology – QuickBooks Online (QBO) is the core accounting system that we use with all our clients, but it doesn’t do everything that is needed. To meet this need, QuickBooks has a lot of partner apps. While this is great, it can also be overwhelming. Thankfully, since we focus on the construction industry, we already have a list of ‘go to’ apps that we turn to first for our clients (although we are continually evaluating if these are still meeting the need). Sometimes we investigate new or different apps based on client need, which was the case for Bob with Procore. The suite of apps that we landed on for Bob are as follows:
    • Procore – This is the best-of-class construction project management system in the world, and it handles most of Bob’s issues listed above. It keeps everyone on track in the all-important monthly draw process and so much more (including some nifty on-site tools for Superintendents).
    • Bill.com – This is really the only app we’ve found that does a great job at paying bills. It saves so much time and hassle!
    • T-Sheets – Everyone loves T-Sheets for time tracking. It’s intuitive and easy to use on the go, and it provides great reports.
    • Karbon – This is an internal task management tool that we use at Joy Accounting. One of the cool features is that we can send tasks to our clients via the tool. This helps Bob stay on track with all the miscellaneous tasks we need him to do throughout the week.
  • Process – Technology is only as good as the processes that a company implements. As mentioned earlier, Bob had only recently formed his company. So, although he was starting to use Procore (a great construction project management system) he really needed to define his processes so that he could leverage Procore in the best way possible. And this is where Joy Accounting came in again.

We worked with Bob to build out process flow diagrams for each of his most important processes. This work memorialized information that, until then, had existed only in Bob’s head. Getting this all on paper was a critical first step to scaling the business. Additionally, it defined how we needed to ‘tweak’ the system to make it work for his business. And it helped us define how exactly we needed to use the other apps mentioned above in the overall flow (such as Bill.com)

  • People – Getting the processes and technology in place is only 2/3 of the battle; it’s critical that employees are on board as they will play a large role in determining overall success. Since we got the people and technology in place, we have been organizing trainings with various stakeholder groups such as Superintendents and Subcontractors – sometimes with Procore leading, sometimes with us leading.

Results: We are at the tail end of our first full year of working together with Bob. Getting the kind of people, processes, and technology in place and finely tuned is a bit like building a house. You have the design in mind, but there are many unforeseen challenges that come up and require tweaking. And we have certainly experienced some of those difficulties throughout the first year. However – Joy Accounting’s focus on Bob’s people, process, and technology has acted as a blueprint that we continually point to and drive toward.

As 2017 winds down, Bob is close to meeting his revenue goals this year and, as mentioned earlier, is looking towards tripling this number in 2018. It will not be easy, but we all believe that Bob can scale that next mountain with the partnership of Joy Accounting!

 

Understanding the True Cost of An Employee

As a small business owner, you don’t have much margin when it comes to the cost of doing business. The employees you hire are so critical to the success of your business, but how do you decide how much to pay them?

There are many aspects to this decision, but in order to set an hourly (or salaried) rate for an employee you first need to understand the factors that contribute to the overall cost of that employee. Once you understand the true cost of an employee, you’ll be able to use that figure to determine pricing for the services you offer.

Today’s post is brought to you by Marian Ellis, one of our amazing accountants on staff at Joy Accounting. Enjoy!

Why are labor costs important to your business?

One of the decisions that every business owner must make is how much to charge for services.  While there are many factors that impact your rates, the most misunderstood is generally employee labor costs.

While some might think that labor costs are easy to calculate (you pay your employee $20/hour so it must cost you $20/hour) the reality is that the average employee’s true cost can be anywhere from 25-40% higher than their hourly rate.  If you generate estimates for your customers based off an erroneous labor rate, you run the risk of cutting into your profits or, in a worst-case scenario, losing money on customer jobs and projects.

The value of knowing your true labor rate goes beyond client billing.  It is important for business owners and managers to understand the cost of non-billable work (time not spent working directly on customer projects).

It is virtually impossible and likely counter-productive to attempt to eliminate all non-billable time.  Meetings, other administrative tasks, and training are simply a part of doing business.  Knowing the true cost of these activities, however, will help you eliminate the unnecessary tasks and determine alternate value-added tasks to focus on instead. For example, if your employees are engaging in a manual administrative activity every week that adds up to a total true labor cost of $500, you might consider ways of automating that process to reduce costs.  Perhaps an automated solution might cost $300 per week.  If you do not understand your true labor cost, it would be impossible to do an apples-to-apples comparison and make an informed decision.

How to determine your true employee cost

The true employee cost calculation will be different for every business.  There are, however, several elements that you should consider when doing your calculation. Of course, some of these items (i.e. payroll taxes) are fixed, while others (i.e. paid time off) can be set based on your discretion, and your decisions around these discretionary items will cause the true employee cost to fluctuate considerably. The elements to consider are as follows:

  • Payroll Taxes – Federal/State Unemployment, Social Security, Medicare, Workman’s Comp, local payroll taxes, etc.
  • Health Insurance – Employer paid premiums
  • Retirement Benefits – Plan management cost and employer matching contribution on plans such as pensions or 401(k)
  • Paid Time Off – Paid breaks, vacation time, sick leave, paid personal time, paid holidays
  • Overhead – Expenses such as office space, recruiting costs, supplies/tools, administrative costs (recruiting, payroll), uniforms, company paid cell phones, computer equipment, etc.

Knowing how much your employees cost is a requisite of any well-functioning business. As with many accounting and financial concerns, it is highly recommended that you reach out to a professional, such as Joy Accounting Services, for assistance.  Calculating employee costs and streamlining processes to reduce non-billable time are only two of the many skills that we bring to the table to help grow your business.