With the new year arriving in a blink of an eye, there’s no better time to reflect and review how your construction business did over the past year and to gear up and prepare for this year but now. Since the holidays are over, it’s time to start making a list of all the things you need to settle, improve, and remove from your company.
No matter how your company did this last year, the new year presents a fresh opportunity to do things better and smarter, or when needed, to do things differently. Today, we’ll provide a construction start of the year checklist as a guide to give you a few points to think about as we move forward this year.
1. Review the Business Side of Your Construction Company
It’s the new year, and there is no more perfect time to review the business side of your construction company operations. This administrative side of your company is just as important as your project management for construction and therefore needs the same attention.
Below are the major points that you can use as a guide in reviewing your company’s business for this new year.
- Close any inactive businesses.
- Review status of existing businesses.
- Check your business filing status of existing businesses at Office of Secretary of State.
- File Annual Report for your business. (The form is usually available from Office of Secretary of State).
- File “Articles of Amendment” for the following:
a. change in address.
b. change in authorized shares.
c. change in Board Members.
- Hold annual meeting.
a. Bring meeting minutes up to date.
b. Bolster corporate shield by operating as separate, non-personal entity.
- Tie up any legal loose ends.
- File for applicable Trademark/Copyrights.
- Make sure all building permits are up to date. • Ensure that your DBA (Doing Business As) is up to date.
- Review retirement account and investments.
- Confirm that contractor licenses are updated in areas where you build.
2. Conduct a ‘Customer Temperature Check’
It doesn’t matter if the majority of the customers you’ve worked for last year are the 5-year regulars, or if they are composed of brand new faces, there is no perfect time to conduct a ‘customer temperature check.’
Some of the critical questions to ask yourself and your team are the following:
- Who have you worked with more than expected last year?
- Who have you worked with less than you had hoped to?
- How did the relationship with the new customer last year go?
- What do you plan to do with new customers this year?
Apart from answering the questions above, a temperature check should also involve reviewing the following:
- special customer request
- outstanding payments
- late payments
- potential clients
Moreover, it is also beneficial to list down customers who tie up more of your resources- such as time, money, and inventory- than other customers do. Sometimes problems like these will make the actual profitability of certain customers even lower than it appears to be on paper.
You may also want to evaluate which customers bring in the most successful construction projects and which ones have certain difficulties. You should have an updated preferred customer list to know who your best customers are and who you should prioritize the following year.
3. Review this Year’s Financial Trend
You most likely already look at your financials month over month, but now it’s time to look at the big picture and spot your past year’s financial trends. Trends are critical for planning ahead: reviewing a year’s worth of financials will give you valuable insight into your slow and busy months. You can review each month based on the following:
- How many new construction projects were started
- How many new customers your company gained
- Average construction timeline of projects
- Month with the least profit
- Month with the most profit
4. Settle Any Outstanding Invoices
You may have pending invoices that have been slipping through our ledgers – it happens to all of us. The start of the year is the best time to settle out those books and get paid accordingly. If you’re certain that you won’t be paid on specific invoices, prepare to categorize the lost revenue under lousy debt in your financials, but still consider the options you may have. If you have a remaining unpaid on a construction project, you may want to consider filing a bond claim or a mechanics lien.
Some of the financial aspects of your business worth reviewing are the following:
- Review last year’s Numbers of Your Business.
a. Cash Flow Statement (Beginning Cash –> Cash In/Out –> Ending Cash)
b. Income Statement (Sales –> Expenses –> Net Profit (Loss))
c. Net Worth Statement (Assets –> Liabilities –> NET WORTH)
- Create a written budget for next year
- Verify loan amounts on all outstanding loans.
- Figure out when you can rest your Lines of Credit, if possible.
- Reconcile all bank accounts.
- Reconcile all credit card accounts.
Furthermore, it’s also essential to make sure what you have in your year-end financial statements correlates with your bank and credit card accounts. It’s also critical that your ledger balance matches, too.
5. Start Setting Your Goals for the Upcoming Year
It’s time to start planning your resolutions for this year, both personal and professional, and even for your company. As previously discussed, while looking at your preferred customer list, think of ways to get more from your customers on this list – whether it’s nurturing up your relationship with a customer who’s not part of the list or by acquiring new customers.
It’s a time to make plans to attract more customers, such as email advertising plans, marketing campaigns, or requesting your existing customers for referrals. You can utilize your review of the previous year that passed to model your predictions of expected profits, growth, and losses per month for this coming year.
It may also be an excellent opportunity to revise your accounts receivable policies. There’s no better time than January to announce improved payment policies, such as extra fees for unpaid invoices, and to begin rolling out a new memo or notice plan to keep your lien rights secured.
6. Consolidate Your W-9 Forms
Were you managing construction projects last year with the help of hired subcontractors? Then you will need to collect their respective W-9s. This form will act as a paper trail to track your Internal Revenue Services (IRS). Furthermore, this is a method for the government to keep track of construction subcontractors and their income.
As a general contractor, required by law to submit and fill out a 1099 form for every vendor you’ve paid $600 or more for the services they provided, then that 1099 must be filled out and submitted to the IRS by January 31 of the following year, it’s also worth noting that there’s a new 1099 form employers will need to start using starting January. Instead of reporting non-employee compensation or NEC via Form 1099-MISC, you must fill out and file the Form 1099-NEC by January 31, 2021 (if not, on the next business day).
Additionally, you should also prepare the following as part do your construction crew management:
- Know, record, and stay on top of the status of subcontractor insurance coverages.
- Choose to start the year using the Subcontractor Management Contract system.
- Make sure all subcontractors have agreed to your company Terms and Conditions in the form of a signed contract or waiver.
7. Evaluate Your Collections Policies
Had a project gone haywire, and you didn’t receive payment for your services? Conduct a thorough “post-mortem” on that specific project to see how everything was managed and identify which areas where a different approach may have yielded better results.
Additionally, review how your company handled your lien rights in this unstable situation. Note construction projects where lien rights were lost because of avoidable missteps, like signing a waiver or contract before receiving payment or getting caught up by a missed deadline. Consider all your account notices and lien policy, and create an improved game plan to correct any gaps in your company policies that may leave it vulnerable.
8. Collect All Your Receipts
It’s essential to keep track of all your purchase receipts throughout the past year. A mountain of paperwork sitting atop your office desk is the last thing your Accountant would want to see.
Good news, there is an easy way to organize all your expenses. With the digital documentation feature of Pro Crew Schedule, a construction scheduling software, you can say goodbye to a plethora of paper bills and receipts spread out all over your desk. Snap a picture of any document and bam! It’s stored right in your software by the job. That would allow you to more easily categorize and amount the majority of your expenses, which aids in streamlining your financial processes.
There is no need to worry anymore about losing a receipt or any document at that, and no need to hold onto one with ink that’s already faded before you record it.
Start the year right by incorporating a construction management software solution in your growing company so that you can end this year with no regrets. Try the 30-day free trial of Pro Crew Schedule today!