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Contractor bill format for Product quality

I'm back hello joining me for the next part in this job schedule Series and this is the fun part I'm I'm not kidding about that well maybe I'm the only one that thinks it's fun CU I'm kind of a nerd and a geek but this is the part that I really enjoy which is really looking at what does this job schedule mean so if you followed along on the other two we learned what information you needed to gather up and we learned what the different columns mean you can follow along with that one and then we learned how to affect our financial statements with the journal entry and therefore balance and match our Revenue to our cost in this piece I want to talk about what the results of this really show and I'm going to show you a couple other columns that I like to look at and I think that they might be useful to you and so I didn't want to not talk about this the first one I like to look at is the and we're going to actually use all the calculated columns for this video so I want to look at gross profit and gross profit percentage so why do I look at it what I want to look at this these columns for is I'm looking for a couple of key pieces what I want to look at is that we've got a group of jobs here that are all running about 14% in Gross average gross margin so let's use some critical thinking skills here and say what should our income statement gross margin run well 14% right I mean that's the way it should work but it doesn't always work that way and so I use this portion of the job schedule to test whether my income statement makes any sense and in order to do that I'm first looking and saying okay well overall we're earning 14 % so if I go to my job schedule and I see I'm sorry if I go to my income statement and I show we're earning 20% I'm going to ask a few more questions like what causes that are there jobs that aren't on my schedule that are doing very well like let's say a group of service jobs um is there something I missed is there something mispost but I really should see something that is similar to the results of my jobs on my job schedule to what the results in my financial state stats for the same piece of work what if I see the other thing what if I see that we go to our income statement our gross margin is running something like 5% ah yeah that's not normal either that means that again I could have missed something on the job schedule maybe something got posted as a cost after I prepared my schedule and ran my journal entries but I use this column to go and test and analyze whether my income statement Mak sense before I ever let it leave my my possession so what do you do if it doesn't make sense well of course I want to run through and make sure that I did grab the right cost to date I did grab the right Billings to date I did make sure that my cost and excess and Billings and excess tie and then if it's still off I might have to dig in even deeper and that would be for another video but the first things you want to test is make sure that you have all the information proper on your job schedule so now that we've looked at our gross profit and our income statement and let's just say that your income statement is running 13% and I would go you know that's probably pretty close so you can move on so what else do I learn out of this schedule well here's the parts I get excited about let's look at the cost in excess and Billings in excess we are asked a lot is like one good and one bad and what does it mean well it depends on what you're looking for now I like to focus on cash because I think cash is so important it's the what is the cash is King cash is lifeblood of the business you know all those fancy cash raises well looking at our particular job schedule what this means if we take a snapshot as of 6:30 that means that we are going to be short of cash and how do I know that well we're under build so that means that at some point this $$ 120 versus the $90,000 is going to rear its head in cash and I can expect that I am going to be short about $330,000 in my cash flow because this is our example in usually sometime between 30 and 90 days now why do I have such a wide range here it depends on whether you're a general or you're a sub and it depends on the terms of your payment with your customers and your vendors and suppliers and subcontractors so depending on what your ratio is and what you run because uh if you're a general you're going to run collections faster than if you're a sub many Subs are running you know a 55 to 60-day collection period if you're a third tier sub it could be even longer and then depending on when you pay your subs vendors suppliers will determine when this happens if it happens in 30 days or if it happens in 90 days but it means that at some point you're going to be upside down in cash so whenever I see something in this column whenever my cost in excess is larger than my Billings in excess I paused for a minute and I start recognizing am I going to need to draw in a line do I need to prioritize some upcoming payments what do I need to do to make sure that this doesn't turn around and bite me whenever I'm trying to manage the cash piece now Billings in excess you know I'm kind of a fan because that means that there is going to be a time whenever I am having cash so if I had to pick I would pick over Billings higher than under Billings now what about your outside people what is your bank and your Bonding Company think well they kind of feel the same as me they like to see over Billings more than under Billings but they don't like to see very big ranges of either if there is a um red flag the red flag comes from this one if you have cost and excessive Billings and you have continuous cost of excess and Billings on a job many times that can be an indicator that the job is actually going to perform at a loss or at least lower than what you have it on the job schedule for now this is not always exact it could just be that you're not able to front bill or project Bill 3 weeks a payroll so it's always underbill it could relate to the timing of the job but if you are running a pretty standard under billing amount on a job and it does not fall into that kind of a category you really need to ask some questions on whether these columns are correct so if I see steady cost and excess of Billings on an outsider it brings a red flag of maybe there's a loss for me it's a red flag because I know it's going to affect cash and now we're going to go to my other two favorite columns which are these back two columns now I call these columns optional they're not on every job schedule they they don't perform any function other than its information so why do I like these two well I just get to see Revenue backlog and whenever I'm dealing with the accounting and the finance function I want to know what is coming so I know that we have $2.5 million still yet to earn for our revenue and I also know that we're going to earn $394,000 in gross margin now if I know my overhead I can also kind of start looking at are we going to be profitable are we going to have net income just based on these two columns it takes a little bit to get your Rhythm on these last two columns but I like to include them because now I can also contribute as we are talking about revenue and backlog and gross margin and overhead and cost recovery it's like my little secret weapon to know how we're doing so I promised in one of my first ones that I would also deal with what would happen if you have trouble getting this information so this is kind of my last little tip and why I enjoy this schedule and this process so much sometimes the first time you're going to ask about these information from your project manager and and estimator they may not be comfortable answering or they may get discouraged or uh you know they just don't understand why well you can let them watch these videos that might help and might save you a little bit of pain but what if you can't get the information so I give you my first best tip beg yeah beg them please please please will you please give me the information um they probably will laugh but sometimes they might pity you and help you out which you know I don't care how I get it as as long as I get it so many times I will beg please please please will you help me you you you you're killing me Smalls you got to help me on this and many times my begging actually works um you know I don't know if you're going to need to pull out the water works but my my my begging usually does get me there if they're not available or they just refuse then the next place to go is see if you can find a job well see if you can find the original estimate sometimes that is available to you so you could use that information again it's not the best because we want the future think we want to know how that jobs ultimately going to turn out and not really how the job was only estimated we want to know if we uh bought it out differently or we're going to have Labor overruns and the next one is if you could use a similar job if you've really got nothing you could use a similar job or past performance and put a number in those columns so you might go in and and sometimes you won't have any of this information so let's just I'm I'm going to totally mess up my schedule here but hang it hang with me because I think you'll understand why I'm doing it what I would then do is say okay I don't know any of this information so I'm just going to use the current cost that we have to date and I don't know what our contract amount is going to be but you know we typically make 14% so I'm going to just mark my cost up 14 % and get a number in there now do you remember you might remember this number was 58 805 or 818 I don't 58,000 I remember that part so look at what we just did we got close to our over Billings amount by just using an average again this isn't the perfect world but if you're stuck and you don't know what to do to move forward you always can just well guess and you would be better off in guessing than to leave this job making $65,000 in gross profit I think you see where I'm going and the last item is if some sometimes you'll have your PMS or estimator struggle just because you're asking for it on a monthly basis so the next key piece on this is to beg them on a quarterly basis instead so you could go in and please please please please please on your quarter ends and then use that information for the other two months again it's not perfect it's not the best but sometimes it's the only thing you've got and many times if you say I only need you to do it four times a year to really dig deep and really give me a full analysis of the job and where you think it's going to end up they'll go okay okay I will do that um you know a lot of the project managers already know how that job is going to turn up and so this isn't any big deal for them they're happy to share it but every once in a while you're going to have to ask different ways to be able to complete this so I hope you've enjoyed this series and understanding more about the job schedule we've gone through what you need to gather where to gather it how to book the journal entry and then the key pieces that you also learn from this and how it relates to cash flow and then I even threw in the begging which I I hope you really enjoyed so I hope this gave you the information that you needed if for some reason you need additional help you know to email us at the info Atlas cfo.com And by all means don't be afraid to allow your project managers and estimators to also view these videos it might really help the relationship and understanding the importance of the job I hope you have a great day and that this job schedule Series has made a difference for you thanks