Name: Preparing for Year-End Close
Uploaded: 2026-09-29T19:30:44.964Z
Duration: 56 min 4 s
Description: Preparing for Year-End Close

Transcript for "Preparing for Year-End Close": Yep. Good afternoon or good morning, depending on what time zone you're joining us from, and welcome to today's webinar. We'll begin here momentarily, but wanna cover a couple of quick housekeeping notes before we get started. For the best experience, we recommend Google Chrome or Firefox. The audio for today's presentation is streamed to your computer as there's no dial in, so please make sure you have your volume turned up. You can download the slides via the resource widget up in the top right hand corner of your screen. Any of the widgets on the screen can be resized to fit your, screen. And please note that you will receive an email with a link to an on demand recording of today's presentation so you can watch it back, share it with anybody else in, in your company that may benefit from today's content, or certainly share with anybody else in the industry that would benefit from, today's topic. So what we're gonna talk about today is preparing for year end close. So quick introduction before we get started here. I'm John Mivers, vice president general manager here at Delta Computorese. I've been working in the construction industry for, thirty five plus years now, quite some time. Was started my career in construction as an end user, did that for ten years of Computorese, and now I've been on this side running the Delta Computorese team for the last twenty five plus years. Very excited today to have Kathy Barrington join me. Kathy, I'll let you introduce yourself and tell everybody a little bit about you and, your company. Thanks, John. How are you? I am Kathy Barrington. I own KBCPA Accounting, and I've been working in construction for roughly twenty four years now, but in accounting itself for over thirty. And, I'm excited to be here with you all today. Yeah. Great to have you, Kathy. And I know the the audience is gonna, you know, certainly benefit from some of the great things we're gonna talk about. I know you and I talk about a lot of these year end things all the time and, gonna share some of this with the with the audience. What we're gonna cover today, you know, why you're in close sometimes can feel painful. What are some of the the the common whip and job costing pitfalls that you can encounter? You know, we'll talk about streamlining reconciliations, talking about getting tax season ready, you know, the role of purpose built software like computers, something that's built for the construction industry, how that can certainly factor into all this. And then certainly, we'll, you know, close out with some key takeaways and then open it up to some q and a at the end. Alright. So I I think, you know, Kathy, wouldn't you agree? I think that, you know, kind of the same same thing, you know, you probably encounter with your clients every year. You know, the same kind of four common issues. You know, scrambling for numbers. You know, the the the adjustments pile up, you know, the books don't tie tie out. And at the end of the day, tax season just feels rushed because probably we, you know, we we as a contractor haven't done, you know, the proper preparation. But we'd love to just kinda hear, you know, your take on on these, on these issues, kinda what you see with all the different, contractors that you work work with. I mean, generally, I don't have these issues with my clients. So, that's part of what I do. And so I definitely have that situation when I have companies coming to me that I have not worked with. So having the proper SOPs and that sort of thing are very, very important. If you have the correct processes in place for month end close, then this won't be painful. But if you don't, then there could be a lot of pain. Yeah. Yeah. I think what, you know, what I see a lot of times, and I know, Cathy, we've talked about this before is, you know, sometimes people let it all pile up, so to speak, and wait till the end so then it feels rushed. They, you know, they they're they haven't been reconciling throughout the year, so things don't tie out. The, you know, the adjustments pile up. They're scrambling to put together information. And I know we were talking about this the other day. I mean, to me, year end is the it's it's the end of a month. It's the end of the quarter, but it's and year end is just one more little thing. It's nothing you know, if we're closing the months and the quarters properly throughout the year, year end becomes just another standard part of that process, and it will not feel painful. So as Kathy said, I know, you know, Kathy's clients, you know, are not gonna be in this situation because that's what her and her team are are working on. But if you feel like you're in that situation, you know, it's probably for one or multiple of these reasons. You know, you're waiting and you're you're you're you're putting off till the end saying, well, that's a year end thing, so I'm not gonna deal with that. I don't need to, you know, to reconcile throughout the year. I don't need to tie things out. There's there's no reason to to do that. And then if if you do it properly, year end just becomes another just another step in the process. It's one more checkbox at the end of a month and a quarter that, oh, this also happens to be the end of the year, and there's a few other little things to, to to tidy up. But it, does not have to be painful. So if you if you take away one thing from today, you know, I think that is it. If you're, you know, sitting here almost we're almost in October, almost getting ready to start q four, if, you know, if you haven't even thought about the you know, what what year end's gonna look like, you're you're, you're a little you know, you're late to the game. You know, you should already be be well, you know, into that into the planning for your end. You should have you know, you're getting ready, hopefully, to tie out here, close September, close q three, and roll over into q four. And if you do all that, you know, I think that's you're gonna make things a lot heck of a lot easier at the at the end of the year. Exactly. Yeah. You know, some of I know, Cathy, we've talked about this before, and I know something that you and I, you know, that we're both very passionate about the, about the WIP reporting and the and the forecasting and all the wonderful things that the WIP schedule, you know, can do for us. But, you know, I think some of the things that that that I see and and, you know, is, you know, we're, you know, we're not consistent with our percent complete. And it doesn't necessarily you know, there are different methods to get the, you know, the percent complete. You can, like, do percent complete to date, dollars 2 complete, which will then calculate the percent complete. But the I think, to me, the the biggest thing is consistency in doing it. However you're gonna get to that cost to finish number, it it has to be done on a consistent basis. So that's that's what I know I see that a lot. I'm just kinda curious what what you see for maybe people that come to you and don't have a good process and you help them put a good process in place. Yeah. I mean, I think the first thing that's really important is to make sure that all the different people and the stakeholders that are involved in this process are speaking the same language and making sure that they understand different things. So you have a completion based off the field. You have completion based off accounting. Then you also have completion based off upper management. And so making sure that you all are speaking the same language in regards to understanding what it means for a job to be closed, because you have the physical completion of the structure or whatever you're working on, but then you have all of the accounting side with the costs and the billings and the retention and all those things. What does it mean to be completed on the accounting side? And then from a management perspective, you know, do we have any actual issues that might arise even if we've think we've closed out the job a 100%? Do we need to create any contingencies in there to make sure nothing actually continues to hit the job once it's complete, almost like a warranty situation. So speaking the same language is really important in this. Yeah. And I think, you know, one of the things that I always like about computers and a lot of our, you know, customers like is that, you know, in computers, you can mark a job as as closed, which which prevents anything being posted to us. So if I am truly done and I'm saying it's complete and I and I classify the job properly, if if, you know, something comes in, it's gonna it's gonna raise a red flag, and I'm gonna have to acknowledge that, you know, hey. This is after I've marked it as closed and done all the final reporting. So I think that's, you know, that's critical. Like, in computer is we can have active, inactive, and closed. Inactive means there's I'm still probably waiting on something to post, but it's not an active job. Closed means I believe I'm 100% complete with everything. I'm gonna mark the job as closed. I think it's important that you know, I've seen it where people will just leave all the jobs active forever. They never they never change the status, and that that creates, can create some, certainly, some difficulties. You know, the. yeah. Absolutely. I the actually use the inactive and the complete, differently. So, normally, what I do is I change a job to inactive during the year when it's been completed. And then at year end, when we go through our entire process and make sure the job is complete complete, then we put. it as complete. So, it allows me to filter the jobs that have been completed in the current year under the inactive status. Oh, that's great. No. I like that. Yeah. I think that's a that's a that's a great idea. I really like that. The, you know, unbilled revenue can be missed. You know, we can we can run-in issues with, with cutoff procedures. You know, you have you have the billing. You know, your pencil copy might be due the twenty third of the month. Final copy's due, you know, the twenty seventh of the month, whatever those dates may be. But then you run into situations where, you know, an invoice comes in from a sub or supplier that, you know, did did it get counted in the invoice? Did it not? Did you bill for it? And so you need to be you know, you need to think about that and and be careful with the, with the cutoff dates and make sure we're not, you know, we're we're not gonna end up in, you know, an underbilled situation or we're, you know, we're not billing for revenue that that truly is earned in this period because we didn't, you know, we didn't follow the cutoff. So that and that can be you know, it it's it'd be easier, but it's not the world we live in. If it you know, if you waited till the month was over and then you could bill for all the jobs. Well, we know in construction, that's just not the case. The billing billing cycles, while, you know, they may represent the the quote, unquote month, that they may not be due on the last day of the month. They may be due prior to that, so you have to you have to account for that. So I think it's really important that you have a good billing process in place and make sure you're accounting for all the cost and billing for all the revenue that you're entitled to for that particular billing period. Mhmm. And any pending change orders that you have the costs in there, but, you know, haven't properly been communicated to accounting or whatever it is, You don't want those change orders to be reflected after the fact or after you've completed the job. Right. Yeah. And I think that's one of the things that I think, you know, once again, if you're using a system like Computereus, it's, you know, certainly recording the change order after the fact when you get a signed document is important, but at the I it's equally important, I believe, to record the change order from the time you request it. Because as you said, Cathy, a lot of times, we're doing work on a change order even though we don't have the signed document back yet, and we need to make sure that we have have have accounted for that and and have a good track in change orders. It's, you know, a lot of times in a non construction specific solution, you end up, you know, only accounting for change orders once they've actually been approved and signed off on when, really, you should be tracking them from the time you send in the request for a change order. Exactly. That's what the pending status is for. That's right. That's right. Pending pending change orders are a a and a great thing. And even, you know, in computer is you have an option if you want to include a pending change order in the WIP calculation because you've done all the work and maybe you've gotten approval to bill for it even though you don't have the signed document. You know, the you know, ComputeRees has some wonderful options to allow you to to include or not include a pending change order in the in the WIP calculations. Yeah. So, you know, reconciliations, I think this is, you know, one of the things that I I think too often I see is that people wait and they, you know, well, we're just gonna tie all that out at the end of the year instead of tying it out monthly, having a process to where, you know like I said, if we close every every one of the twelve months properly, year end is a breeze. But if you wait and well, we're not gonna tie anything out till the end, it you know, that reconciliation becomes a heck of a lot more difficult and and when it you know, to to tie things out. But it's you know, I think it's a great best practice as we should be, you know, doing it throughout the year, not as a year end fire drill because we have to get it done now because the year end is approaching. And I think that's you know, a lot of times, you know, people will come to Computorees and they're they don't have a good process, and then they'll, you know, they'll have the ability within Computorees to do that. Or, Kathy, I'm sure you brought on clients that didn't do a good job of reconciliations prior to working with you, but you, you know, you and your team teach them and help them, you know, understand the importance of that process and get into a habit of doing that on a regular basis. Yeah. And, I mean, we do most of the reconciliations, so that's kind of part of what my team and I do. And what I am I have quarterly reporting clients, but even on those, I do a month end close internally. So even if I'm not issuing financials for bank and bonding, I'm doing the work on a monthly basis to, you know, tie out depreciation, to tie out the WIP, look at the bank reconciliations, obviously, tie out any of the balance sheet accounts. So we're keeping an eye on things because if you have any system SOP issues or things that aren't being posted properly, you can catch them and fix the process rather than having it get away from you six months later, and now you're cleaning up six months. Your reports aren't right. Your numbers are off, and all of the decisions you've made along the way have been based on inaccurate data. Yeah. I think that's you know, I I like what you said there, Kathy, because even even if you're only preparing quarterly financials for, you know, the bank, bonding, who whoever it may be, I think it's always a best practice to internally do monthly, you know, do monthly reconciliations, monthly reporting. It you know, you're my experience, you're gonna spend less time doing it monthly than if you did it quarterly. You're yeah. You're gonna do it three times throughout the quarter, but in total, you're gonna spend far less time than if you let it all pile up. And now you're doing three months worth of bank recs and tieouts and and reconciliations all at one time. It it's going to take a lot more than than than what it would have taken you to do each month individually. So I think it's just a great best practice, and I think that, you know, I think anybody that, that I've worked with that that, you know, has has great, streamlined, accurate financials is doing that. So, you know, just because you don't have to do it doesn't mean you shouldn't do it for your own. And and a lot of this is you know, I always tell people, yeah, certainly, you know, there are people outside the the organization that wanna see your financials, wanna see your WIP schedule, and and that's great that you have to prepare them for them. But should be doing it for yourself to to to best run your business. And then when they have that I mean, the WIP is a great example for me. People say, well well, I prepare a WIP schedule when I need to. I said, well, what do you mean when you need to? Well, when somebody asked me for it, I said, well, you should be asking yourself for it on a regular basis. And then when those outside ask for it, you're you're already gonna have it. But don't don't do it for them. Yeah. Do it because it's a great tool to run your business in all of this. I mean, you know, don't don't look at reconciling and and tying out the month and closing out the month as something you, you know, that you have to do for for somebody else because they're gonna ask for the reports. Do it because it's a great, great tool to help you organize and and be on top of your business's information and help you better, you know, better run your construction company. So I think that, you know, and I to to me, anyway, I always, you know, I always looked at it as I'm doing this first and foremost for myself and for my company. And, yes, when I somebody outside needs it, I'll certainly have it because I'm doing I already have that information prepared. Exactly. Yeah. And you don't want a fire drill on this, and you want this information because these are your metrics. You know, if you're trying to grow your business or manage your business, I don't even see how it's feasible to do it without having this information readily available. And three months to me is way too far. I mean, how do you make management decisions? Like, if you got your electricity bill, you know, three months later, how could you make changes to bring the bill down? You know what? It's like little things like that where you just. can't make decisions. Yeah. Very very true. I mean, it's it's yeah. You just you know, and that and that's what, you know, with with the the proper, you know, process in place and the proper system. I mean, you know, you you're gonna have the information. It's gonna be in real time. It's gonna allow you to be proactive. I mean, the, you know, the the the WIP is a great example. I mean, if you if you standardize that process and you do that, I mean, the WIP truly gives you a chance to to see where you're going before you get there. And if you wait until you get there, it's too late to change direction or change course. I mean and, you know, it's I always use the example of, you know, if I, you know, if I have two project managers running a similar job and I ask the first one, well, how are we doing? They said, we're doing okay, John. I've only spent half the budget. Mhmm. Okay. Well, the job cost told me that. I what I really wanted to know is what the second PM said is, well, John, we spent half the budget, but I've only done 40% of the work. That tells me the key piece of information that, okay. At that pace, we're going to go over budget. If you've if you've only done 40% of the work and already spent half of the money, well, at that same pace, you're gonna spend all the money and only be 80% done, which means we're gonna go over budget when it's all said and done. And it's not often you get an opportunity to to based on the information to date to see where you're going where you're headed, and don't wait until you get there. I mean, it's certainly relevant once you get there, but there's not a whole lot you can do once you get there about what's already happened where, you know, if you tell me we've only done 40% of the work, we've already spent half the budget, we can talk about that. What you know, what why? What has gone wrong? Is there something we can do to get this get this back on track? So don't, you know, don't wait until it's too late. And, you know, for me, it's all about knowing the the the score, knowing where you stand, and and I wanna know in real time, not after it's over. Yeah. And this is a good time to communicate between the field and accounting. Like I was saying before is is having those, conversations of if field thinks the job is 80% done, but according to accounting, you're at 40, then there's a few questions. Right? Are we having budget issues, or are we just missing costs? If we're heavy on the subside, Are we having sub issues where the sub isn't sending out the billings in a timely basis? So we can't manage our costs. You can align those things and see, okay. I'm at 80% complete. I am missing all of these things in these different line items. I need to go reach out to my sub and get the bill. Yeah. So these communication things come up when you're doing it on a regular basis. And I have, you know, a lot of project managers and things like that that are looking at things daily. So if you've got a heavy labor, cost on your jobs, then you're gonna wanna be looking at labor stuff because if overtime is going crazy and out of control, then you can manage that a lot faster. Yeah. Yeah. I think, you know, looking at things daily. And that's one of the things that we're certainly in in, you know, in in in my history of of working in this. I mean, the the definition I I to tell people, the definition of real time has changed. You know, when real time used to be, you know, we got time in this week for last week, and then we processed payroll, and then we updated job cost. And that was real time because it was as real time as we could get. Now we had an updated job cost report. But in reality, some of those hours were worked ten days ago. They were worked at beginning of last week and were already the middle of this week where, you know, if you've got a good system in place where you're capturing, you know, time from the field on a daily basis, you're gonna see that on your job cost report as pending labor costs that will be, you know, run on the next payroll. You're in you're in much better control of where you stand. And and like to Kathy's point, I mean, maybe overtime is out of control the, you know, the over the last week. And I don't wanna wait until the middle of this week when payroll post. I wanna see that as it's happening. I wanna see, you know, what's going on in real time. And I think that's one thing that you know? And I think today, most, and certainly not all, most contractors are, you know, in in a place where they're submitting time on a daily basis. There's still some that are out there doing it weekly, and I just think that's with the tools and technology available today, there's no reason not to get those hours in today because that is real live information that is important for as a project manager for me to see, where am I at? And I got a lot of labor going on in the job. I wanna be on top of that and know, hey. Well, I'm burning through the hours this week, and I wanna see that in real time. So I think that's something you know, think you know, to me, I always tell people, what does real time mean to you today? And it should mean something different than it did many years ago because the technology has changed, and we have the ability to get that information in real time. Absolutely. Yeah. And I think, you know, a lot of it is you know, I know, Kathy, you talked about communication, and I think that's one thing that, you know, I I think as an industry, I think we've gotten maybe somewhat better, but there still sometimes seems to be disconnect sometimes in companies between the accounting and the PM and the ownership. And and we but we gotta communicate. Everybody's on the same page. Everybody's after the same goal, which is to, you know, to to make sure we're running a a profitable job and and, you know, at the end of the day, profitable company. And, you know, I I know back when I started in construction, it seemed to be there was a lot more well, this is accounting is annoying project management, and project management is annoying accounting. And, you know, we're not all on the same page. And I think, you know, a lot of companies, they've gotten much better at that, and I think the best in class are really good at communicating that. But, you know, don't it it's not you know, it it you know, accounting's not harassing project manager by asking for updated forecast numbers, you know, and and just, you know, understand that we're all working together, and and it's all about communication with, you know, communication with external parties, you know, subcontractors, general contractors, owners, suppliers, but also internal communication between the field and the office and make sure everybody's on the same page. And I think with the right with the right system in place, certainly makes it much easier for everybody to be on the same page. Yeah. And I I mean, I I think that is up to kind of the owners too to create that culture of it being a team environment and the communication being open and, you know, people understanding the why behind people, you know, what they're asking for, instead of, you know, having it be a defensive issue or anything like that. I I think it's so important, like you said, to make sure that it's it's a team environment. We're all in this together. We're all doing our own jobs, and we have different pieces of the job and different reasons for what we need, but everything we need from every aspect is important. Yeah. Yeah. It really is. And I think, you know, the, you know, I like what you said about creating, the the right culture, Kathy, because to me, you know, we know construction isn't perfect. You know, we know every job is not gonna go as planned. And it's you know, sometimes I'd find that it's it's kinda human nature if I go back to my project manager example. Even if I know I've only done 40% of the work and but I've already spent half of the budget, maybe, you know, I don't really wanna give you that bad news, so I can kind of you know, I'm not gonna be maybe as forthcoming as I should be. But we need to create a culture where it's okay to say, look. We're not we're not on track. And, you know, because, you know, I could just try to well, I'm gonna you know, we've all been in that situation. I'm gonna catch up. I'm gonna make it up. I'll so I'm just gonna go with, hey. I'm I've I've only spent half the budget. I'm in good shape. When in reality, I know that I've only done 40% of the work. Even if I think I'm gonna make it up, I wanna I wanna bring that out. I wanna have that conversation internally. So, hey. Look. We're a little bit behind. We've only done 40% of the work. I know I've already spent half the budget, but here's how I you know, even if I already have a plan to to catch up, let's communicate that plan. Let's let let it not be a surprise because if you you know? And if but if I don't encourage that, if I encourage people to hide the bad news from me and and I don't find out until it's too late, that's why I know I've always back when I was in construction or even, you know, in my role here today, I always tell my team, we're gonna have issues. The biggest problem I have is when you don't tell me we have issues, and we can't address those and work together to get through that. So, you know, I would encourage everybody to encourage those open lines of communication, you know, and and it's you know, in a in a perfect world, every job would come in under budget. We know that's the things are gonna happen out of our control that, you know, could be a lot of times, but it that's not the reality of the of the world we live in. But if you set the right culture and everybody's encouraged to collaborate and work through that together, we're gonna be in a much better much better place. What a what is a what is a clean close look like? So, getting, you know, quote, quote CPA ready, but, you know and and hopefully, you're not getting you know, you're you're getting ready by just doing everything, you know, all all year long. But, I mean, what what do you you know, as far as, like, your best in class, you know, clients, Kathy, what what are they doing to to make it, you know, to to, you know, throughout the year? And and I think that's one thing that, you know, and I know we've talked about this before. I think a lot of times, contractors sometimes find out, well, I'm I'm only gonna deal with my outside CPA at the end of the year. That's the only time I really need to communicate with them. And that, you know, that that should not be the case. Right? It should be working with working with your, you know, your trusted partners and advisers throughout the year. So then then you're not running a fire drill at the end of the year. Yeah. Absolutely. I mean, you know, I start kind of prepping for year end closes as of the 09/30. I mean, most of mine are 12/31, so, relative to that. So q three, so whatever that is. Q three is when we really start looking at things and seeing, okay. What jobs are we gonna close out at year end? When you close them out, if you have percent complete, you have to have them be a 100% built. You have to have a 100% of the costs in. I know accounting sometimes thinks, oh, if there's open AR or open AP, that means I cannot close a job out. That's not true. If you have open AR, as long as the job is a 100% build and you don't think you're gonna get a rejection and a deductive change order, which I can understand, you know, if you're hesitant, then my recommendation is always just keep the job open, like, 99% so you have a little bit of leeway there. Don't close out a job prematurely. That's always gonna be my advice because the biggest issues that I run into is in the following year having closed job costs. And what that does is it basically starts you out in q one with a bunch of warranty costs in essence. You're you're starting the ground running with a negative profit fade on jobs that you didn't complete out properly. So I generally will always look at, you know, that first quarter of cost that came in just to make sure, you know, the jobs really could be completed out. But these are the start these are the types of things that you really need to start looking at come q four at the start of it because you also wanna be able to use that information to do the tax planning, to talk to your bonding agent, to talk to your banker about, you know, these are my thoughts for your end. I think about doing these bonuses. I'm thinking about doing this. You know, what do you think? Where do I need to have retained earnings? You know, where do I need to have certain things to have it look okay on all my clients get reviewed statements. So there's a lot of notes and disclosures that get put in those, and you want to have good information that you have ready before your year end hits so you can make decisions before it's too late. Yeah. Yeah. You don't wanna don't wanna wake up on, 12:31 and try to and then be scrambling to figure out which jobs am I gonna am I gonna, you know, have as closed this year. I mean, you know, even could be some variation between now and the end of the year. But like you said, Kathy, I mean, you know, tomorrow's gonna be, you know, 09:30, and we got a quarter left to go. And and, you know, you probably have a pretty good idea and, you know, most contractors of what jobs am I gonna be able to close out this year. Which which ones have I already closed out, and what of what I have still open will I be able to close out over the next three months? And and, I think it's you know, you wanna start planning that now, not wait till, you know, last week in December and and be scrambling to to to figure that out. And I think that's, Yeah. that that's important. And, you know, and that you know, the the you know, there's a lot of things that, you know, come with that you know, come with closing the job out. As Kathy said, you know, the, you know, the the, you know, the open AR, you know, doesn't necessarily mean that you can't close it out. You know, there's things that you want to you know, I find a lot of times people, you know, they're they they've, you know, the you know, tidying up the the last bit of retainage can be a problem. They let that hang out there, and they don't, you know, they don't tie out the, you know, the retainage. They don't get the final retainage, you know, released. They don't get the final re final retaining, you know, approve you know, the okay to submit the final retaining bill. That's all part of, for me, you know, closing out a job. I mean, you know, I gotta button everything up. I mean, that means, you know, the and, you know, I've I've gone in and I've seen some people and their their their, you know, unbilled retaining schedule looks horrible because they have little amounts on a whole bunch of different jobs that just they never fit they never they never tied it out. They never finished it. They never, you know, checked the last, the last box and got the final retainings, and that can add up over a period of time. So you gotta you gotta be on top of that at all times. I mean, that's you know, it's, you know, the re it's it's real simple. That retainings ultimately is yours, but to get that, you're gonna have to complete all of the final you know, the punch list, the closeout docs, everything that that comes with that. It's, you know, it's the nature of our business. Right? The the retainage process is there for a reason, to hold people accountable for doing all those final things. But as a, you know, as a contractor, it's easy to move on and say, well, I'm on to the next big new job, and I'm gonna, it's really a pain to go back and and do these last couple things. But there's a retainage payment that's that's, you know, depending on those things to be done before it can be released. So don't don't lose sight of that and have a good system that, you know, that where you're on top of the retainings. You know, where where am I at? What is that you know, what do I have by job? What is unbilled? What's been billed? Not yet collected. Don't let the you know, don't don't let the retainage dollars slip through the cracks somehow because that, that's gonna come right off the bottom line. Yeah. And if you're a smaller contractor and you're completed contract for your tax basis, then this is even more important because, you know, if you're percent complete in your accrual basis, then the financials you're producing are pretty close to what's gonna be taxable. Well, if you're completed contract, it is literally just that. And if you don't properly know what jobs you're gonna be completing out, you you could be in for a horrific surprise in either direction on what your actual taxable basis is. Yeah. Yeah. That's a great point. And, you know, and and I think would you agree, Kathy? I always tell people even, you know, if you're if you can still if for tax basis, you're on a completed contract, you still wanna look at your books on an accrual basis to understand where you're at. And the, you know, the the converting to completed contract is, is a tax strategy, not a day to day running of your business strategy. Because I've I've seen where people say, well, I'm on completed contract, so that's how I'm gonna that's how I'm gonna look at my information throughout the year. I said, well, that doesn't you know? Or if I'm on a cash basis of, like, well, you you mean I know, you know, as far as cash basis, you don't technically have AR and AP, but trust me, you have AR and AP. And, you know, you know, we'll you can convert to cash basis at tax time, but don't, you know, don't look at your business day to day on completed contract or cash basis. It's, you know, it it it's it's accrual and percent complete because that's that's the reality. of, the work that you're doing. And that's GAAP. So I do everything in GAAP, which is what bank and bonding are accustomed to. So, yes, if your cash basis for tax return purposes I'm still looking at the AR and AP, but we're just adjusting that out for your tax basis. So. all those numbers are so important. The tax basis is a tax adjustment. Let your tax person worry about those, in that respect. You always should be keeping your books on accrual and basically percent complete. Yeah. Yeah. Alright. You know, I know we've talked a lot about the the, you know, the WIP process. Yeah. I think one of the things, you know, that is great about a purposely built solution like Computerease is you've got the WIP schedule, the WIP process built into your system. You know, for you know, a lot of times, we're dealing with contractors that are using QuickBooks or maybe they're migrating from QuickBooks to Computorese. And, you know, nothing against QuickBooks, certainly, but it's not a construction focused system. It wasn't built for construction, and, you know, it's what I'll call a generic accounting system. And it's, you know, to in my my opinion, certainly, you know, as you start to grow as a contractor, it's not going to it's not gonna do the the job for you. It's not gonna have all these construction focused things such as the work in progress report. I mean, you you know, that should be a critical part of your monthly, quarterly process, day to day process, and is forecasting, you know, identifying the over under billings, properly accounting for the over under billings in the financial statement. It's you know, I sometimes we'll see people you know, they'll they'll go through the effort and they'll prepare a WIP schedule, but then they don't make the the over under billing adjustments in the financials. And that's really, you know, if you you know, if you're if you're a contractor and ever wondered why it's so important that the, you know, that the the the surety underwriter, the bonding agent, or the banker wanna see your WIP schedule with the financials, they wanna verify that you've made those adjustments because, you know, the financial to me, a financial statement for contractors is not not relevant unless I have a corresponding WIP schedule and can can validate the, you know, the the revenue that I'm recognizing because real easy to make the the financials look good if I'm overbilled, and it looks you know, if I treat overbillings as revenue and profit, I could have a really healthy financial when in reality, it you know, it's not because I'm, you know, I'm in an overbilled situation. Overbilling is great for cash flow, but it's gotta be managed properly throughout the financial throughout the financial process. Exactly. Exactly. Yeah. So I think, you know, that's one of the the many benefits that a system like Computerease brings is you, you know, you you have that built into your solution. And whether it's Computerease or other construction specific solutions, it's, you know, once again, not meant to be a knock on a generic solution, but, you know, that's one of the things that generic solutions are not gonna do. They don't understand the importance of the WIP schedule, retainage, tracking, all those things. So, you know, I always encourage contractors. You know You know, you you you wanna get the right tool for the job, and a generic accounting solution is, you know, not necessarily, in most cases, gonna be the right tool for a contractor. And, oh, the one thing that I've I've run into with people is, you know, they think that the generic software oh, well, you know, it's it's so much more cost effective. And I said, but where's the other cost that you're not looking at? Like, the amount of accounting labor that it's gonna take to get you the information you need or your accounting person the information they need because it's not readily available in the generic software. It is painful. There's no controls in place. It's just not set up. And so you're gonna be saving costs on the software side, but you're actually gonna be spending more in a lot of other areas that you're not taking into consideration. Yeah. That's a great point, Kathy. You're yeah. You may you may be saving some on the software side, but you're gonna, you know, you're gonna spend a heck of a lot more in other areas. And you're also not gonna have some a lot, you know, real time relevant information to make intelligent business decisions, which can end up costing you money as well. And maybe it's not a a direct out of pocket cost as, you know, as a software subscription would be, but, Drew, there certainly is a cost if you don't have the proper information to properly manage your business. There there certainly is a cost. It can be a a severe cost or penalty associated with that. Alright. So, you know, I think, some of the things that, you know, I I I know we like to talk about with with our contractor clients is, you know, certainly, you you know, fewer surprises at, at year end. We can minimize the the adjustments, but, you know, I don't know. Maybe, Kathy, I'll let you kinda talk about what is what is good look like as far as, you know, year end for, you know or throughout the year. I I I say year end, but we've already talked about we should be doing this all throughout the year. But just, you know, what are some of the things that you recommend that everybody's doing on a regular basis so that there are very few surprises and you're getting a much cleaner package at the end of the year? I mean, the biggest thing is having the standardized cutoffs. So having your cutoff dates, you know, if it's gonna be the fifteenth of the month for payables. I have clients that are anywhere in the range of fifteenth to the twenty fifth. They're waiting in the following month for as long as possible to get all of the AP that they need for the jobs to enter it as of the prior month. So making sure you have a date. You know? When is AP supposed to be done? And then also, when are your billings supposed to be done? If you have to do your billings on the twentieth of each month, then you make sure that they're done by the twentieth so that doesn't extend out and you get them rejected or they don't get thrown into the following month, and now you've got cash flow issues. So all of those cutoff dates are so important to standardize, and all of this stuff should come from the top down. Right? So having those things, you know, when do your project managers have to get their certain reports in by, their cost estimates. Do you guys have a project manager meeting regularly? When is it? You know, if it's in a range between the twentieth and the twenty fifth of each month, then everybody knows that this is happening every month. If you have a Friday meeting, you know, everybody knows that they're supposed to be in this Friday meeting. So having as much standardized as possible is just gonna create efficiencies, and it's also just gonna create consistency, which is what you want. The review the committed costs, that's a big one, is making sure that I mean, if you're not fully using the committed costs, then making sure you're reviewing every line item in the budget, and that's a project manager's job in my opinion. It's not the accountant's job. It is the project manager's job because it's their job. So they need to be reviewing all of their budget line items. And if there's anything missing or if there's overages in it and they haven't adjusted the budget. Those things need to be reviewed on a regular basis. And, I mean, down to a weekly basis in my opinion. Monthly is minimum for that for me. And then, obviously, reconciling everything, and I we reconcile the entire balance sheet. So we're making sure that all the numbers are right on the balance sheet, things like that. I'm also tying out the whip to the profit and loss and the balance sheet because there's accounts on both, and making sure that all of these things are done in a good time line. And I appreciate that as well because that allows me to be consistent and know when the reports and everything are gonna happen. If you don't have these SOPs, you're at the whim of everybody else. If you're not making sure that payables knows that they have to have everything in by a certain date, then now you're waiting for them to be done, and that just creates issues in my opinion. So having standardized processes for all of this is foundational. Yeah. And it's and it's so much easier if you're doing this on a regular basis. It becomes it it, you know, it it's it's when you let it build up that it gets, that it spins out of control. But if you're doing it on a regular basis, you know, and like like you said, Kathy, something should be done weekly, some at a minimum need to be done monthly, and then it's not it's not a big deal. But if you let it all pile up, it it will it will then quickly spiral out of control, and and it's just, you know, it's just a it's a great you know, just build that muscle memory where we do this routinely every week, every month. This is what we do. We don't you know, we're reviewing committed costs. We're reconciling. We're all these things. You know, we're we're not waiting, you know, we're not waiting till the end of the year. We're not waiting till the end to to tie all this out. We're if we do it on a regular basis, it becomes very, very easy. It's it's when you when you have just a, you know, a a pile of information and none of it's been reconciled, none of it's been tied out, and then you're like, now what do I do? Where where you know, if you if you organize it and keep it and keep it clean and and organized and and follow the process, you'll be you'll be in a much better place. And, you know, it's still there there's still a quarter left in the year, so maybe you haven't done any of this yet. You know, don't wait till the end of December. You know, ideally, you maybe you would have been doing this, but, you know, start sooner rather than later. You gotta start somewhere. And, okay, maybe you got a bit of a mess today. Well, it doesn't mean we can't start cleaning that up now, get to where we're in a good place by year end, and then continue that on into the next year where we're doing this, you know, all all throughout the year. So it's you know, you gotta you gotta start somewhere. Don't just look at it and say, well, it's already out of control. I can't, you know, I I I don't know where to start. I mean, you you know, you gotta you gotta jump in and and get started. So look at all these things and kinda take inventory of of how you do all this today and, you know, and then and then see if you, you know, feel like you're in a in a in the right place. But, it's it's never too late to, you know, to start getting things organized, cleaned up, getting into a into a regular process. You know? So I think, you know, obviously, you know, you wanna get, you wanna get off to a to to a great start. You know, I think at the, you know, at the end of the year, we're gonna, you know, we're gonna to to wrap up, have the final WIP numbers reconciled, locked in. We're gonna you know, you're gonna have your you know, I ideally, you're doing an internal review, you know, before before an external review, you know, or and or audit. You know, you you've you've done your internal review, so you feel like you've got everything in a good place and or you hand it off for, you know, for outside for, you know, outside eyes to look at. And then, certainly, you know, fewer adjustments means, you know, faster, much calmer, of of process, you know, for when we're when we're filing and because you're already off and running for next year. I mean, we you know, I wanna get into I wanna I wanna wrap up this year and get into next year as soon as I can because we got work to do for next year. And, you know, so don't, you know but the the longer you wait, let it all pile up, and, you know, the year drags on and on and on, and we're, you know, we're still we're still, you know, dealing with last year at this time at this time this year or, you know, in the in in q three, you know, I mean, I and and, certainly, you know, the extensions are there for a reason, but doesn't mean that because there's an extension, we don't have to we don't wanna get everything wrapped up and done in a timely manner. I mean, certainly, you know, extensions are used and and there's, you know, there's a a reason for them. But the the reason isn't so we can just delay everything that we should have been doing all along. Mhmm. So I mean, my number one goal is when I hand it off to the CPA firm that does the review and the tax return, is that the only adjustment I have is tax related. Because I am not a tax CPA. I don't do tax shift. I rely on the tax people to do that, and that is what I hope for is that the only adjustment I had from the review is literally a tax adjustment because that tells me that the integrity of the information that we've been working on is correct, and we have good information. And that also gives confidence then to bank and bonding and whoever's looking at your financials that the financials you're producing during the year are right. If I get, you know, I mean, there's a lot of clients that I'll first get and that's, you know, one of the first things I'll ask for is their reviewed adjustments. And a lot of times, I'll start with two or three pages worth of adjustments that are just from bad accounting practices throughout the. year. And and like you said, Kathy, it doesn't give confidence to the people outside that are getting your you know, that that are reviewing your financials when, you know, when when they've got, you know, multiple pages worth of adjustments. But you're right. I I I mean, I love what you said there. The, you know, your your goal is the only adjustments are gonna be tax related adjustments, which would which is what it, the way it should be. So, yeah, I think that's great, great advice. So if you were to just give everybody some key takeaways, Kathy, what would, you know, what would you if everybody took away, you know, a couple things from today's from today's session, what would you what would you want them to take away? Set up a regular process, making sure you're looking at your numbers consistently and constantly, reasonably. Right? You don't wanna go overboard in information and then not use it. So think about what you're using and make sure that you have a good process in place so you have eyes on it and you've got good numbers. Yeah. I think it's to me, you know, it right. It's all about the process. You know, you wanna you wanna be consistent. You wanna standardize. You want, you know, you you want everybody you know, if I got project managers doing WIP adjustments, I wanna have a standardized process across the you know, I don't want one doing it on the, you know, with on the the first of the month, the for the month prior, and another one waiting till the twentieth of the month for the month prior. I wanna I wanna have a standard process in place on on our WIP reviews, the WIP adjustments. You know, I want my, you know, I want my accounting team to have a standard process in place to close out the month and, you know, tying out everything from, you know, payables to receivables to job cost and and and GL. All that should be done on, you know, bank recs. All those are just the standard day to day things we do. Let let's have our process that, makes sense. You know, I wanna have a good billing process. You know, I wanna understand that, you know, that every job doesn't bill on the same day of the month, but let's, you know, let's have a process in place so that we we we understand the different dates that every pay application is due, understand the the process. So, yeah, I think it's all about, you know, standardizing, making it repeatable, and and making sure that there's communication. So if somebody's out today, the system doesn't fall apart because nobody knows what the process is. So, you know, the the the you know, the better you are with standardizing it, the easier your the better prepared you are for when when something there is a bump in the road or somebody's out or, you know, something happens and somebody has to step in. If everybody's following the same process, it should be very easy for somebody to to step in and and see it through. And. to that point, documenting it. You know, there's so many tools available now where there's really no excuse for not documenting your process. And like you said, somebody can just step in, hopefully. I mean, they might not do it right or it might take them three times as long as the normal person, but you know that if something happens that the process will still get done. You. have processes and procedures that are documented, and that's so key. So I I think with all the tools in AI available right now, that should be made very important. Yeah. Yeah. That's a good point, because no no reason today, especially today, not to document it. And, you know, I don't want I don't wanna guess as to what somebody was doing if they're out. I wanna I should be able to go and say, okay. Yeah. They, you know, they manage this job. The pencil copies do the state. The billings do whatever whatever the process may be, you know, whether that's, you know, you know, payroll or what whoever it may be. But just ask yourself, if if this person is out, would I have any idea of what to do if I had to step in? And if the answer is no, if nobody knows what to do, then, you know, you don't have a well documented process in place. Alright. We're gonna get to a few questions here. While we do that, I'm gonna launch a quick polling questionnaire. If you'd like to be contacted to, learn more about the, certainly, Delta Computerese, you know, how a construction specific solution can help with some of these things, you can certainly check the, yes box there in the polling question. We'll leave this open for, the, you know, thirty seconds or so. But while we do that, we'll jump into some questions that have come in. Alright. So when does the prompt pay clock start? Is it when the final version of the pencil copy gets submitted for review or when the final version gets approved? You know, so I I guess, you know, I'm, you know, the definition of prompt pay clock is it could be, you know, that that could be a little iffy there. I'm not you know, some but I think, you know, there's the pencil copy due date, and then there's the final copy due date. And I think, you know, obviously, the pencil copy, you know, is gonna is going to be approved and you know, before the final billing is due. But then, you know, typically I mean, to me, I always you know, the the the final billing date was kinda when the clock was starting for me. I don't know about you, Kathy, but when I was, you know, when I was tracking AR, it was from the the the final billing date till, you know, until until we got paid was the was how I was aging those receivables. I don't know if you have any any thoughts on that or what you what you're mean, same thing. I mean, I have some of them that's, you know, based off approval date even if we backdate it. So I had, you know, GC that they would bill around the fifth of the month, but it would be for the prior. month. So they had to wait for school board approval and things like that. So their clock really started on, say, the fifth, but we did put it into AR the prior month. So it really depends, yeah, like, what your actual company is and what the legal ramifications are to some of these things. So that's definitely important. And then the other one is retention and making sure that you're not billing it too soon. I have seen subs that bill retention when they're done with the job. That's not how retention works, and so sometimes what ends up happening is you have these retention amounts that are put into AR because they're released and they're being aged out. And then when I ask, like, hey. Has the GC actually told you that retention is ready to be billed because they're done with the job? Well, no. We were done with the job. Yeah. It's like, well, we. we build if. they're not done yeah. If we're not. done for six months on the job, like, you can't bill retention. It's not due. Yeah. Yeah. That's a good point, Kathy. You're right. Because it's, you know, it's it's unbilled. Not until you decide to bill it, it's until they give you the approval to bill it that they're gonna accept the bill. So you're right. It yeah. Because I've seen that too where, well, I'm just gonna bill it so I can I can get it billed on my end even though I haven't gotten approval to bill it? So, yeah, that's a that's a great, that's a great point. So I got another question here. What is the best way to find discrepancies between the AP aging report and the balance sheet? Not a 100% sure. Well, they did you know, I've certainly, the AP should the the AP report should tie to the balance sheet. You know, in in system like computer is you shouldn't be able to get well, you you if you're doing things properly and have the proper controls in place, you you can't get those two out of balance. So, there there are certainly ways you can, you know, you can find the discrepancies. But I think it starts with proper setup and proper controls in place for your system so that those two can't be out of balance. So you can't get the aging report out of balance with the, with with the balance sheet. Yeah, so there's a few things I've seen with that. I saw another question too about discrepancies between GL and job cost, and it and it all falls into that same bucket where either, one, you do have some system setup issues, so your controls aren't set up 100% right. The other thing that I've seen is mix match of period versus date. If you're putting and if the controls are letting you do it because of system setup issues, you could be posting something to a job cost with a date that is not the same as the period. So say 09/01, but you're posting it back to August. You're gonna have a mismatch. So there are certain things that are date sensitive as opposed to period sensitive. So understanding the system that you're using and knowing, you know, what it's actually telling you and then two, making sure your system is actually set up right. Yeah. Yeah. Understand. the controls that are that are available in the system, make sure it's set up right and, you know, for like, I'll I'll use computers because that's the one I'm most familiar with, obviously. But, you know, I'm I'm on a setup you know, we talk about the the GL and job cost as an example. You know? You use the controls that allow you to say, you know, that a a a job cost expense has to go to a job and has to go to a the job cost section of the GL. I can't go to an overhead GL account if I'm going to a job. I can't go to, you know I I can't go to the job costed section of the GL without going to a job. So if you set those things right, then, you know, the you can eliminate the, you know, the the possibility of those discrepancies happening in the first place. But understand the system, you know, the the the system parameters, the, you know, the guidelines that are there. Make sure you're taking advantage of that. And that's where a lot of times, you know, whether it's the the the Computery's team or Kathy's team, you know, we, you know, we we can that that's what we're here to do is help assist our clients, making sure they're getting the most out of the the system and most out of the built in guardrails that are put there for a reason because it's you know, without those guardrails, it's easy for those things to happen. Somebody, not intentionally, but inadvertently does that. But that, you know, we we those guardrails are there for a reason. Great. Well, Kathy, this has been great. I know we're just about the top of the hour here. Certainly wanna thank you as always. You know, I know we've been working together a long time and, you know, still, love the partnership we have between your company and and us here at Deltek ComputerEase and really appreciate all the all the great advice that you bring to, certainly not only your clients, but to the industry as a whole and really, appreciate you joining me on today's webinar. I really appreciate it. I love Deltek, and it's been a great software. I've been obviously working with you for a long time, implemented it several times, and it is definitely one of my favorite softwares. So I definitely appreciate being a CPA partner. Yeah. But we love hearing that, Kathy. So, with that, we'll, we'll wrap it up. Just a reminder, you will be getting a a link to an on demand recording, so you can certainly watch this back. You can download the the the slides, and then certainly feel free to share the, link to the recording with anybody else that would benefit from the the today's content. If you, checked yes in the polling question, would like to learn more, we'll certainly be reaching out. Or if you there are any unanswered questions, I think we got the most of them. If there's any any unanswered questions, we'll reach out as well. So thanks, everybody. Thanks again, Kathy. Everybody have a great, great day.