The Financial Setup Every Contractor Needs Before Hiring (Part 1)

The moment you hire your first project manager, you lose control of your money — unless you've built the systems to track it first.

In part 1 of this two-part series, Clark and James break down the financial foundation every contractor needs before bringing on help. Because the truth is, your employees see money completely differently than you do — and if you can't track your own dollars now, you'll never be able to hold someone else accountable to them.

They cover:

• Why your project managers treat money as a tool, not as profit out of your pocket
• How hiring exposes every financial leak you've been ignoring
• The real cost of "I'll just eat it" once you're running three crews
• How profit-based raises get your employees bought into your numbers
• The 3 steps to get hire-ready: connect QuickBooks, categorize weekly, lock in work orders
• Why tying every material purchase to a job is the key to real job costing
• How sub agreements and work orders stop cash from leaking out of every job
• The patterns you'll start spotting once your numbers are actually visible

If you've ever finished a job 8% below where you started and couldn't say exactly where it went, this is the episode that fixes it.

Part 2 drops next week — projections, cash flow, and the general manager's accounting worksheet.

If you're doing $350K–$2M a year in revenue, coaching pays for itself. A 5% efficiency gain alone covers the cost — and that's before we even talk about growth. 

We help contractors stop losing money on crews, change orders, and inefficient operations — and start scaling. 

Ready to have the conversation? Set up a free call at contractorcuts.com

Contractor Cuts is a weekly podcast for contractors who want to build a better business — covering sales, operations, hiring, finances, and everything in between.

🔗 Book a free call: contractorcuts.com 

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Transcript

Welcome And Why Money Matters

SPEAKER_00 0:01

Welcome to Contractor Cuts, where we cover the good, the bad, and the ugly of growing a successful contracting company.

SPEAKER_01 0:13

Welcome to Contractor Cuts. My name is Clark Turner. And I'm James McConnell. Thank you for joining us again today. So today we are starting part one of a two-part series. We've gotten into these two-part series all of a sudden, but this is a good one. It started out as a single podcast and it ended up kind of growing into two different sections. And so we thought we'd separate them out and kind of break it down on a deeper level. Today we are diving into financials and why your numbers are so important and the things you can't ignore, what you should be doing. Money, honey. It's all about money, honey. We frame this one around getting hire ready, getting ready to hire somebody, what has to be in place, what do we need to be doing? Um, a lot of people, whether you're a one-man show or you've already got some employees, but you don't really track your finances tightly. Um what we're trying to do when you come into coaching is have a full grip to where I understand where every penny's coming from, every penny's going, and how do we monitor that? Uh so today we're diving into if you do nothing, if you do if there's nothing else you're doing for your finances, what we talk about today is the minimum we need need you to be doing. Um, before you can hire somebody, you have to understand your dollars and and be able to have accountability on yourself on where your money's coming and going. Because it when you hire somebody, you all of a sudden have zero control of the dollars that they're spending unless there's a system in place to keep them accountable and to track all of that stuff. Um, one thing that that we wrote down here is you know, understanding that hire and bringing someone into the company, uh a new project manager. Um, one big shock that we have with guys that come in and start hiring, and we kind of grow the company to build a higher project manager or four uh is

Hiring Exposes Financial Leaks

SPEAKER_01 2:05

the it's it's very abrupt of a shock to guys of how their employees view money totally differently than they do. Right. For me, if I can save $100 on a job side, that means me and my wife can go out to dinner together. Um for my employee, dollars are a tool to get the job done. Their job as a project manager is to get the project executed. Now, they need to be on, you know, they need to be in their budget, they need to hit the right numbers. Uh, but for them, saving 100 bucks doesn't matter in the big scheme of things. It's not going to affect them very much. Um, you know, seven, eight hundred dollars on a job site might affect you a fraction of a percent. And as long as I'm hitting my my my percentages that that are projected for me, I'm at 35%. That's fine as opposed to 35.3%. It's not a big difference when it comes to my pay as a project manager. I'm hitting my numbers, I'm getting my revenue up. And so I'm gonna spend the money I have to get just to get things done. And I might be buying some convenience for myself, totally fine, but there's a difference of an employee buying convenience for themselves to get things done and get out of there quicker and not managing money well. And so what we want to do is set up processes that allow us to man monitor as well as manage the dollars and have an accountability system set up to where when I hire an employee, he knows exactly uh he there's a way for me to see where the dollars are going and coming from, and I can hold him accountable to mishandling that cash, right?

SPEAKER_00 3:39

Yeah, misappropriation of funds is the big ticket word.

SPEAKER_01 3:43

That's great. And James is also running for Senate, uh, which is which is amazing. And I'd be honored to have the seat. So we're gonna dive into kind of as a one-man show, two-man show that that you're running your company now, how should you be looking at your money to prep for hiring? And now, if you never hire, that's okay. But being being able to do this is where we're gonna start patching the holes in our leaky bucket, where the dollars fall out of, where it's hey, we've got, you know, I started the job at 38%, I finished the job at 29%. What happened? Where'd that 9% drop go?

SPEAKER_00 4:19

If you're not hiring, I bet you could still use a couple thousand dollars in your pocket.

SPEAKER_01 4:23

Yeah, yeah, at minimum. And and I I I like to frame this around hiring because guys think, and to be honest, most people running jobs can do it from the uh off their head and they can be profitable, but they still lose a couple percentage points and they're fine with it because it's uh you know, it's just cost of doing business, and I'm just gonna bid it a little higher. And that uh honestly, if you're a one-man show running, it's not gonna affect you a ton. Um, it's when you start scaling, when you start getting bigger, and when you start wanting to hire, is when you know, eight hundred dollars here and there, you know, if you're running two to three jobs at a time, you're losing eight hundred dollars per job, might be a couple grand every month that you're losing, but I'm making 15 grand a month. So uh, you know, it's the cost of doing business. The headache isn't worth the headache. Yes. But when you when you multiply that and you've got three project managers running, and you're now doing $7 million a year, and every job's losing $800, we're now looking at a $50,000, $60,000 loss in the company because these systems aren't in place. All right. And so getting super efficient with our numbers when where you're at today really lays the groundwork for hiring for growth in the future to where uh uh it's a little bit of effort to get a lot of gain. It just takes a lot of effort to get it set up. Yeah. Does that make sense? Like getting all of this done, getting what we're talking about today, the first two to three weeks is gonna take four hours a day for three different days over the next two weeks. If you can set that aside to get things organized and set up, you're gonna be spending 15 minutes a week on really the money management stuff, maybe 30 depending on the size. But again, it's a small investment of time each week, every Monday morning or Friday morning or Tuesday morning, whenever your office day is. Once we have these processes in place, then it's just making sure that everything has its is is organized and has its place. All right. So the two different relationships with money, we've already kind of covered the the mindset of an owner versus the mindset of an employee. Do not get mad or angry at your employees for having that mindset. Their job and their goal and their why is totally different than yours. And we've got to understand that. Their why is to get their jobs done, have high uh customer satisfaction, hit their revenue goals and hit their profit goals. If they're doing those three things, they're an excellent, excellent employee. Um because of that, like I said a second ago, if their revenue goal is 35% on this job and they're at 36 and they just spent some extra money to get things done quicker, to get out of there faster and make their job easier, they're still hitting their profit percentage. That's great.

SPEAKER_00 7:03

That's good for them. Hey, man, what do you need to get this done? We need to be done in the next two days. Tell me what you need. Yeah. $1,000, fine. Do it fine.

SPEAKER_01 7:12

Yep. Yeah. And it's the tool, which is great. I mean, that that is what the money is for a project manager and use that tool to get out of the job site. And so there is a big question in coaching when you're hiring is how when is it okay to let them spend that money? How do I how am I not making every single decision on, okay, yeah, you can hire those guys? Uh, don't do, don't spend that, let's do this. And not micromanage

Project Manager Spending Tension

SPEAKER_01 7:35

your project managers about every single dollar. Yeah. Um question for you, James. When where do you see of all the project managers you've ever managed, um, where do you see the most either eye rolling when it comes around dollars and employees or like the struggle with them to where they don't see eye to eye with what you're saying in terms of how, you know, like when you're protecting your money versus them spending the money and saying, well, you know, I'm hitting my numbers. Why are you why are you complaining? Like, yeah, uh where where do you see the biggest push against that and kind of how do you manage that conversation with the project manager?

SPEAKER_00 8:20

I the example I gave, I think, is probably the biggest spot is your project managers are in they're in the thick of it. Yeah, and they have uh the crews barking at them for stuff, they have their clients barking at them for stuff, they got you barking at them for stuff, and you don't want any of that stuff coming to your door. So like that's a separation that you value with your project manager. There's always these periods in a project where you're at reasonable completion and you're like right about to be able to be done. All these random little things are stacking up that have been asked of them from the client. It might be stuff that they've already done that they're going back and touching up, or it might be little things that they wanted to add to the scope, or or you forgot to do a change order. The guys are just trying to keep their client happy. They're right at the end and they want to get over the threshold and be done. And sometimes that means throwing money at the issue. And like your electrician's frustrated because he has to come out back out for a third time. He's the one that messed up all the sheetrock anyway. So you kind of want to hold him accountable for that. But he's the only guy that can trim out his electrical. And he's like, You need to give me another $500 because they added this, this, and this. And like, you never said that that was going to be more money. Well, you never asked me the client. We never talked about it because we don't want to talk about money. We just want to get the job done. And so they're throwing money at the guy, and the conversation kind of always goes the same. It's like, why did you pay him an extra $500 if that wasn't an agreement? Well, because this, this, and this. Well, why didn't you charge a client a change order? Well, we had already hit him with this and blah, blah, blah. There's always a good reason in the project manager's mind why they need to spend more money than we were budgeting for. And they're gonna have to be able to make those calls. Yeah. But that is where always that is where always the tension kind of lies because it's to your point, five hundred dollars to spend that wasn't in the budget is literally five hundred dollars out of my pocket.

SPEAKER_01 10:27

Yeah.

SPEAKER_00 10:28

And that stacks up over time, and it stacks up fast. Like you you can look in the bank account and be like, shoot, this is like two thousand dollars less than I thought was in here, whatever, you know, not a big deal. But it if that's an every week occurrence, you're bleeding, you're bleeding out money that is straight profit.

SPEAKER_01 10:47

And the surprising part when you start getting employees is and this was me. I mean, tell me if this was you too, but for me, it was I almost got so offended by that spending from them when it's like, well, did you take this and did this? And so you didn't have to spend five because it spent two, right? And for me, I'm looking at it like, hey, I'm buying lunch. Oh, you're buying lunch, and then I'll take three stakes, and I'm also gonna get and it's like, well, if it's not your money, you're not like you treat it like your money. Like you wouldn't do that with your money. And and it's it's it's understanding that it's not offensive. It's my job is to get this done and get out of here. Why are why are you complaining at me like I'm doing that and I'm hitting our profit percentage?

SPEAKER_00 11:28

And I I also think project managers suffer from the same blindness as clients sometimes in terms of especially younger guys or guys that haven't ran their own thing or haven't been in operations in in construction. Uh there's this expectation that the money's gonna be there, that there's just always gonna be plenty of money because we're a construction company. We take large invoices all the time. And it's just it's not the case. Construction is a pretty slim margin at the end of the day. Yeah, and the guys just see money flowing back and forth, back and forth, and they just expect it to be there. So it really is an afterthought.

SPEAKER_01 12:04

Yeah. Well, I mean, you're you own this company. We're doing a ton, like you can handle it, James. Yeah, yeah. Or the I uh the from the client side, I've given you a hundred thousand dollars. No, no, no, no. You've given me 30. I've spent 70 of your money on your job. And of that 30, I've paid my salary and my office manager's salary and the insurance to cover your job and the gas. So you've paid me five grand. Like you haven't paid me a hundred grand. And it's the under, it's like, well, you've got all of this money, and why are you? And it's like, no, I don't have all this money. Yeah. That's and even if I did, that doesn't matter. That's not the agreement. So um, I think one thing too is job costing data is a conversation and a preset expectation with our employees. So it's not about my opinion. It it gets rid of your excuse. Um, for me, it's like if we start putting some of the stuff in place we're about to talk about and have it ready and and set as part of our processes, then when you're spending that extra 500 bucks when you shouldn't, um it's not an opinion of mine that you're wasting my money. Or maybe you're allowed to. That's okay because this is this is what we've set is I need you at 35% on this job. Well, I can spend this 500 bucks and I'll still be there. Okay. That's your call. And I'm gonna take my hands off of that. Yeah. As long as we're hitting our numbers, we're good. Um, and then if you've overspent and we're at 29% instead of 35%, then you better be figuring out how to cut corners uh financially and call in your favors with your electrician because we don't have that extra $500. Yeah. But being able to take your hands off the micromanagement of that and say, hey, we're running a company. I have these parameters of how we measure success financially. And as long as we're hitting those, I'm okay with it. And if we're not hitting those, it's my job to make sure we do.

SPEAKER_00 13:50

Yeah. It's a little bit hard to incentivize guys on their for whatever reason, the profit percentages, it's like you get the multiplier and it's like stacks up over time where they can make money if they are more profitable. Yep. But in the moment, the pain of finishing that job out, like it's like your hand on the hot burner. It's like you take it off as quickly as you can because you don't want to be uncomfortable. Yep. You're not thinking about, well, if I can keep this at, you know, if I can gain 2% on this job and I can keep doing that, then by my next review,

Raises Driven By Profit And PAL

SPEAKER_00 14:25

then I'll be in line for a $10,000 raise. It's a lot harder to buy into that math when you're in the middle of the storm.

SPEAKER_01 14:33

Yes, correct. And what James is talking about is our employee compensation workbook that we always use with our coaching clients as we're hiring uh new employees. Uh and what this compensation workbook does, it's it's a very uh detailed out uh way that we run raises for all of our employees. James is drinking in the microphone to bother me. Oh God, that's good.

SPEAKER_00 15:00

Uh sweet earth necklace. Is that good? Yeah.

SPEAKER_01 15:02

Is that beer? What is it? Yes. 10 a.m. Man. Uh so the the employee compensation worksheet. This is where we measure and kind of to simplify it, your revenue that you're doing as our employee, the profit percentage you're doing, and your PAL grade of how every job is going. The PAL grade, project manager action list grade is really a weekly grade that you get per job to ensure that it's really a client satisfaction score, is what it ends up being. It's to make sure that we're communicating, we're documenting, we're handling everything that we committed to the client in an appropriate way on every single job. And so we we meet every Friday doing our POL meetings with our employees, and we go through the project manager's action list, which is all of the stuff that they need to be doing per job. This is where they're getting support, getting our feedback. We're looking at dollars, we're looking at projections, we'll talk about all of that stuff. But as James was saying, that compensation workbook is saying, hey, you get paid your exact value. If you're making this company money, you're getting a raise. And we give raises every six months if it's earned. Um, there's no, we don't do commission based, we do a raise base every six months. And we do that because then on our compensation worksheet, we can lay it out and say, okay, how much do you think you can average in revenue? Great. Let's put you at 120 a month and we'll put that there. Profit percentage, uh, our goal is gonna be 34%. Uh, we're gonna bid it at 35. We don't want to drop before below 34. Um, and then your power grade, anything above a 97.5 on average is gonna give you a multiplier of your raise. Right. And so we lay it all out and there's all this math on it. Um, but really, I can sit with an employee and look at the next three years of their employment here and set goals and say, hey, how much do you want to get paid? Well, I'd love to get to 130,000 a year. Well, let's should let's lay out what it looked like to get there. To get there in two years, you have to do X, Y, and Z over then every six months uh head heading forward. So we can lay out exactly if they want a raise that they want, this is what they got to commit to doing. And once they say yes, then my job as their boss is not to try and not pay them money. My job is now let's get you paid. Because the more money that you're getting paid is because you're making me more money. And so it flips the employee-employer relationship. Because now, James, you said you wanted more money. Like, let's, I'm so confused because you're you're not selling these jobs, you're not doing this, you're not looking at your profit percentage, you're not gonna get a raise, man. Like, I want to get you this raise. And so everything is built around that. But as James was saying, if we're visiting that employee compensation worksheet once a month, looking at what they did last month, what we're trying to do next month, it's great. If we get lost in the weeds and they're looking up saying, I don't think a $5,000 difference on this job is gonna make a change on my pay. Maybe it will by a couple hundred bucks a year, but I don't care. Like, let's just get out of here.

SPEAKER_00 17:46

Yeah.

SPEAKER_01 17:47

Um, I I that's that's gonna be mentality. And that's why we have the weekly pound meetings, which we'll talk about probably next week when we talk about once you have an employee, how to manage money. Um, but all of that being said, having that compensation

Three Steps To Get Hire Ready

SPEAKER_01 18:00

worksheet allows them to get buy-in to why we're hitting our numbers and the numbers we got to hit. Um so moving back to not having an employee, if you're a one-man, two-man show, um, you and your spouse are running the company, maybe you have one employee and you're trying to kind of reset and restart. Um, there's really three things that we need to make you hire ready. There's three steps that are very simple that you can start immediately and really start working by in the next few weeks. You can be higher ready if everything else lines up. There's a there's a number of boxes we have to check before we hire. One's enough revenue. You need an LLC. You need an LLC. Uh, you gotta find a job. Um, once you have the uh have the revenue coming in, we have the marketing set up to where we we have a pipeline built over the next few months. We know how to turn it, you know, all of those boxes are checked. Then we look at the processes and procedures uh around the hire, around who to hire, how to hire, when to hire. We're gonna go through that. But before doing all that, we have to have the finances set up to where it's trackable, it's visible, uh, and we can hold someone accountable to it. Uh, and if you can't do it for yourself, you're not gonna be able to do it for someone else. And so we have to get visibility into your numbers and your data when you're when you're running how you are now before we go into hiring. Um, because once you hire, it is that much harder to track and maintain that those dollars if we

Connect QuickBooks And Your Software

SPEAKER_01 19:25

don't have an easy way to view all of all of the cash. So here are three steps. Number one, I want you to tie your QuickBooks into ProStruck 360. If you have, get on our software. Uh it's the it's the complete version of the software. It's $199 a month, no long-term contract. It's a month-to-month software. It is a start-to-finish running your job from first estimate to final invoice software. You send work orders out of the software, you um build your estimate, send your invoices, all that happens within the software. It manages everything. You connect your QuickBooks to it every time that you assign a work order to a crew, say, okay, a thousand bucks for you. After the end of this week, I say 50% of this job's done. It's gonna create a bill for $500. Once I pay that bill, all of that information pushes into my QuickBooks and keeps all of my costs of goods managed for me. Um, so number one, if we connect our QuickBooks to our Pro Truck 360, all of our invoices from our clients, all of our pays to our payments to our vendors are all gonna be transferred into QuickBooks so we can start looking at the at the financial data in the background. Now, our software also manages that. We've got a really deep super reporting for our profit and loss. It's got something like I think 28 different columns you can select and add into the report. You can categorize it by project manager, by week, by client, any any way that you want to view your data. But until you start actually doing the next part of this, you there's no data to view. Um,

Weekly Categorizing To Job Cost

SPEAKER_01 20:55

so number one is connecting QuickBooks. So we have the two-way sync. Um, because number two, what we need to do is we need to weekly categorize our transactions and tie any sort of spending to jobs in QuickBooks. So follow me on this. Once you have your QuickBooks set up, you're going to sync your bank accounts and your credit cards into QuickBooks. And there's going to be a tab called bank transactions. This is where you're going to spend 90 to 95% of your time in QuickBooks. And that's the only thing you're really going to need to manage in QuickBooks. Um, it's going to pull in your bank transactions, your credit card transactions, and you're going to say, Oh, cell phone, that was for um, you know, utilities for the company. We're going to categorize those expenses. Hey, here's our rent for our office. That's going to go into rent uh office rent. Um, here's where I spent money to buy, you know, we did a team uh lunch at uh Taco Mac. Yeah. Not a sponsor yet. Yet. So we brought the whole team to Taco Mac and we went, we we all had wings and we spent that. That's gonna be a team building activity on. categorize that it gets really quick to do it once you start building those categories within your your uh soft within your quick books but the most important one is hey we uh we bought three hundred dollars at Home Depot it's gonna come in it's a material we're gonna tie that to one two three Main Street we're gonna tie it to the job that we spent it on this is the most tedious part and this takes you 15 to 20 minutes a week on a small uh one to two management size company um if it's updated now when I said in the beginning of this podcast it's gonna take you a uh a couple long sessions to get this set up it's because I I I met with a guy last week he has 700 transactions that he hasn't categorized. That's gonna take time to sort through it. I told him we're not tying all the materials to jobs on these. Let's just reset now moving forward we're gonna start job costing. Everything else just throw into the materials category and let's just get everything categorized before we start tying them to jobs.

SPEAKER_00 22:55

And what you'll notice when you start categorizing things into jobs is you're likely going to need to have your Home Depot account pulled up next to you or the Lowe's account so that you can go in there and see what job they actually did the purchase on because they should be putting the job name there for you. You're gonna start seeing these random things, you know, like 50 bucks for a contractor pack of saw blades or this guy buys a Home Depot bucket every time he goes in there because he uses it a shopping cart. It you're gonna start seeing these little things that you don't necessarily need to like go hammer down and get into everybody's business and yell at them for making purchases you just start recognizing some patterns and then you create processes around those patterns. Stuff we're gonna talk about in the company meetings. Yeah we're not gonna be purchasing if you want your guys to have blades I get it you buy project manager you buy the contractor pack of saw blades and you give them out to guys as you get there or you do one large purchase purchase at the front and you purchase a couple blades so that you know that they're on site that they have them. Don't have your guys running every other day or every day or multiple times a day to pick up odds and ends because they're just going to pick up random things that they may or may not need. I don't know if I have that in my truck. Let me get that. Yep.

SPEAKER_01 24:08

Yeah and that all of a sudden they bought a 12 pack of caulk and realize oh we already have some here and it just ends up in their truck and now I've lost some money. Right. And so yeah it's it's going to help capture the the the misspending to where you see stuff happening. But also it's gonna start job costing for you. So when you're doing what James is talking about and again this is if you're not in QuickBooks and you don't know how to use it and you're not in our software yet, this might sound kind of foreign we'll walk you through it if you come into coaching. We this is part of the the onboarding of coaching to make sure your finances are organized. We don't do it week one or month one it's it's kind of crawl walk and run. But we will get there with your finances to make sure that all of this is happening. That being said if we do it weekly it happens it's pretty easy because every Monday I sit down to organize QuickBooks. Okay, what I buy last Thursday, oh that was for this job and what they guys buy, that was on that job. If we go a month, you don't remember three weeks ago what you were buying when and so then I'm going through all my receipts and who was that for and I think that was for that job. That's right. Okay. Oh but that job closed out so I have to go back and so it it goes from a 15 to 20 minute every Monday morning to an hour to two hours every couple weeks because of the uh amount of brain power it takes to to really categorize and and figure out where the dollars were going. The great part of doing this though is our software then scrapes QuickBooks and pulls all those materials right onto the job card. So if you go into your materials tab and at the bottom of your job items page you can see how much you've actually spent on materials versus what you're budgeting. And so this really allows you to where your percentage of profit on the job, the projection versus the ending number is going to be very accurate because you're gonna see oh look we only spent you know we budgeted 10 grand we only spent eight grand on materials. We budgeted 10 grand we spent 125 on materials there's a problem. Let's dive into that where do we spend that oh that client upgraded the tub let's go hit them with the change order because they wanted a tub that was two grand more than what we budgeted for.

SPEAKER_00 26:18

Or oops I miscategorized this uh I paid for the granite on a credit card and I miscategorized it as material when majority of that was labor because it was a second payment. Yes. So you can find you're gonna find mistakes as you do this too.

SPEAKER_01 26:33

And if you're doing it weekly um if I look and say hey uh we had budgeted $800 for a bathtub. They bought the $5,000 bathtub um we need a change order this week because we just purchased that yesterday I'm seeing that stuff live because I'm doing I'm I'm doing the uh QuickBook side of this once a week. If it's once a month or once every six weeks you are a a month and a half past when that change order should have been talked about. And so you can catch those misses on change orders quickly when it's overspending on materials prior to actually installing the stuff or prior to where we're we're out of the bathroom and we're now into the basement and wait you have a change order for the tub we did two months ago? No you well why don't we talk about it two months like for our CEA you're not supposed to do it. And so it's so much more difficult to have those conversations two months later. All right so number one we're connecting QuickBooks and the software that takes you literally 30 seconds number two we're doing weekly transaction categorization and tying materials to jobs

Sub Agreements And Work Orders

SPEAKER_01 27:40

and then number three is going to be the the process of how we pay our vendors and subs. Number one, we're gonna have subcontractor agreements with everybody. I promise what I promise I'll have them yes we have to have those on everybody this isn't I need a signature on the bottom of this paperwork. This is I need you to sit down with the subcontractor and walk them through the the rules of the game just like we talk about the client engagement agreement the subagreement is as important as the as the CEA.

SPEAKER_00 28:13

And if you don't do this you're gonna be having a conversation with every crew that you don't do this with every week because they're gonna be confused.

SPEAKER_01 28:20

And they're gonna be burnt out in four to six weeks and they'll be gone anyways. The goal and we've talked about this on on a number of podcasts recently the goal with subs is to help support them and grow them and make them as much money as we can. If that's happening they're a really good product that we're putting out and part of that is them understanding how they get paid and how they don't get paid. They understand what makes the money and what will be charged back against them. They understand exactly what's needed work order wise from them. We lay all of this out during the subagreement once you have that meeting you take the time you walk through you've onboarded them as a vendor into your company they now know exactly how to make money and what they're accountable for and what they're not and how they get paid. Then they're not texting you on Tuesday hey can I get a check from you for a thousand bucks I pay on Fridays I can't cut you a check today like we talked about we pay on Friday right and so you can those setting the rules that they agreed to before the game like we talked about with the CEA is so important. Once we have that next thing we have to do is every person, every hammer swung, everything done on a job site has a work order so if I am having them do demo and it's $2,000 I send them work order with the definition of what the demo is and it says $2,000. Our work orders have three main things that every sub's agreeing to when they start work the description of the work the timeframe of start to finish of when that work needs to start and when it needs to be done by and the amount of money they're getting paid for said work. Those three things are what they're agreeing to when they when they swing their first hammer and that's what it says in the sub agreement is acceptance of this work order starts when you show up on site and start doing work. At that point no dollars can change right and so we're gonna live and die by our work order system because that's how we keep subs accountable and don't leak cash like James said with the with the um electrician example if it's just like hey can you get this done yeah it should be about four grand. Cool thanks all of a sudden the electrician's out there some holes were cut in the wall there's an argument as to who's patching it and all of a sudden you get an invoice that's into the job from your electrician for 5500 because he wanted 1500 extra for all the sheetrock work he had to do. And it's like whoa I didn't even ask you to do sheetrock work. Well the sheetrock guy said they weren't going to do it and it had to get done so I did it and so you owe me 5500. Well we've got work order now that says 4000 and you're not allowed to do any work outside of it. We hold them accountable to that the work order system we live and die by will save us cash 100% of the time. This also when you're hiring allows you to see what you're planning on spending with your crews and who's going to get paid what when. The work orders that you're doing now are going to transfer to how your employees do work orders. And this will make sure that you can control all of the spending and allowing them to sit tell guys how much they're gonna pay them and then say hey Clark here's the bill for a thousand bucks for the paint guy and then I print the checks every week as the owner of the company or my office manager depending on the size where we are um subagreement, the work orders and then we're doing the weekly pay process we're following that every single time when you do this the right way it's pushing all of those labor uh the all of the work orders all of the payments I'm making pushing it right into QuickBooks. So all of that is accounted for in QuickBooks because they're tied into the software. So this is how we drop cost. We're understanding where the money's going materials and labor. We know exactly how much cash is leaving, how much I'm planning to do because I've got the work orders out and I know we're almost done with paint so I'm gonna owe them all the money for the paint and I know we're gonna start demo next week. So next week I need to have two grand ready. And I can look at what the work orders are scheduled on the Gantt chart and really start understanding where the dollars are going and then holding my project manager and myself accountable to well I budgeted five grand. I sent him a work order for five grand the electrician went out there for five grand he's done with the work that we've talked about for five grand he's getting paid five grand not 5500 and so abiding by that and having that agreement in place is allowing us to track all of those dollars and hold and patch the the hole in the bucket of miscommunication as to how much I'm actually going to spend uh with with the vendor um what this actually unlocks is real job costing seeing exactly the where the dollars are going is profitability tracking and this is going to start really raising some red flags when you start running this and seeing wow every single job I'm losing about 8% profit. I start at 35% and I end at 27%. So I've lost 8% on average on on these jobs. What's going on? And then that's how we dive into your numbers and we dive into your processes and we start patching up more holes. And so all of a sudden we go from losing eight to 10% on every job that we didn't realize we're losing to now we're losing 2%. And so we've gained you six to eight percent profit by job costing and looking at this stuff and running things smoother uh and you're a lot less headaches because things are running proactively

Takeaways And Next Steps

SPEAKER_01 33:25

not reactively when it comes to the the dollars. All right that was a lot um I felt like I was spewing out a lot of financial it's finances baby it's it's a lot of fun finance um next episode we're gonna go deeper into projections cash flow we're gonna talk about the general manager's accounting worksheet that we use once you start uh having a staff um but here's the take home for this week first off confirm that your Pro Struck360 software is connected to QuickBooks and QuickBooks is the QuickBooks plus version of the software um we want to be pulling in bank accounts and credit cards uh number one number two we're gonna start categorizing those transactions plan a time to clear those out spend two hours every Monday until it's all the way cleared out and let's get QuickBooks caught up um if you need help with that let us know we'll hop on a call with you anything you want to pay crews must be on a work order and we must market complete and pay through the software so we can really track and know what's going on. If you don't have subcontractor agreements let us know that's part of coaching. We give those to you that's part of onboarding and the coachings we train you on how to use them we have to have those in place before using the work orders or they won't understand the importance and how and why we use work orders. We got to do the sub onboarding so if you haven't done that let's set a time to start onboarding subs. Now we're not gonna do the whole company at once we're gonna start with the very next job. Whatever job we're starting next we're gonna onboard whoever we need for that job the right way with the right paperwork and we're gonna say hey we're gonna use these work orders we're gonna roll out this this way and we're going to start owning the dollars in and dollars out between labor and materials. If you want to talk to us about it we'd love to hop on a call uh go to contractorcuts.com uh let us know um uh there's a spot on on the website that you can sign up for a free consultation with me uh you can also set up a call with James if you don't like me um we can yeah you really should but uh we'd love to talk with you about this stuff if you want to have a meeting and you know you're not ready for coaching love it let's let's have that call right now and let's make a game plan by the end of the year we can really double double down and help you we don't want you in coaching until you're ready financially um we don't want to be a chokehold fine on your finances but we want to make a game plan to get you to where you can afford it easily um so let us help you get get there and put our money where our mouth is in terms of helping you grow to that next level so set up a meeting I'd love to chat with you um and also what's coming next week is in the next two weeks starting in July is going to be some freebies when you sign up for the retreat. If you come go ahead and get signed up for our January retreat. I know we're a month a couple months away a number of months away but we're gonna be doing some giveaways for people that get signed up early. So tune in in a couple weeks. All right that's all we got for today. We'll talk to you next week. Bye