In this transcript from a video by Steven J Wick & Associates PC, Steve Wick discusses the financial and operational challenges contractors face in today’s construction environment. The conversation highlights how company size, project type, subcontractor timing, and material price volatility all impact profitability and forecasting. A key focus is Residential builder accounting, including job costing, bid protection strategies, and monitoring supply chain disruptions.
To learn more about improving job costing accuracy and protecting your profit margins, check out our detailed guide on residential builder accounting for construction businesses.
This video is presented by Steve Wick of Steven J Wick & Associates PC in Fort Collins and is for informational purposes only; it does not constitute legal or tax advice, and we recommend contacting a qualified CPA regarding your specific situation.
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[Music] well it certainly can be and so a lot of it can depend upon the size of the business so we’ll say for example a plumber or a flooring company maybe they have four or five employees and they are supervising all of those people and kind of running the jobs that’s probably in fact i know it’s very different than a 50-person company and how it goes i mean that’s just true of any business more employees you have the more layers you have the more diverse pieces are and it becomes that
00:00:55
proverbial plate at the buffet line you just have to really watch those things but yes some contractors in particular depending upon the industry can have very different accounting issues that they need to deal with that are specific to their business [Music] so we try to talk about those a lot plus you also have to think are they in commercial or are they in new construction or are they in the remodel so those are different animals in of themselves also because commercial builders they have different
00:01:39
requirements that like a housing builder might have or a joe blow person off the street that wants to maybe do their basement have some different wiring so all of those things kind of play into it [Music] so usually a subcontractor is someone who a general contractor of some type and they will bid a proposal for a new house we’ll say true and apparent depending upon where they’re at in the pipeline now if you’re early on and you’re a framer well you’re one of the first ones in so you
00:02:28
pretty much know your prices but if you’re a flooring person or a drywall person who might be six months out before they get to your product and changes between that and so what are you going to do as far as protecting yourself so you know you can totally recoup some of those costs if you have a cost change can you get your vendor to lock in a price or can you put it in the contract that we have a pricing change of a certain amount then i can change my bid effectively in particular in this last year that has
00:03:08
been huge that’s not an issue with some people and the cost benefit of tracking all of those things is not there for the client we keep them aware of it so that you know the real issue is is like you forecast you’re going to bid you’re going to make this much money on a job but you weren’t watching your costs well enough and therefore horrible feeling and there’s no way to re there’s no way to make it up if you’re done with that job i mean we do try and look out at the economy and how
00:03:45
they’re doing and how much pre-orders they have probably the biggest way of forecasting and then they got you know their subconscious you’re always talking to the contractors about like what do you guys see coming and blah blah and so you know most of my contractor clients there they’ve got stuff in the 2023 already on the books they just haven’t gotten out of the ground yet because they got to get permits and whatnot so that’s kind of slow down to the subcontractors and they can
00:04:17
sort of fill it in and have at least a decent seat of the pants now if it’s [Music] so that you know i i know generally speaking what the price of like a pallet of wood was it was four times higher than what it was at that pre-coded levels it shot up that much and has gone back down some but it’s not all the way back to somebody bids a job and they say today it’s this and then i i know my flooring contractors they got five days lock in of prices that was it for a period of time there’s only five
00:05:08
days so like wow we called today you got one week to order that material or else the price might change next week so and that was happening time and all through the pipeline things other than texas that’s where almost all the pvc pipe is made in this country and they had that big freeze a while back and it shut down all the power plants and did all this stuff it just killed everything and it killed a couple plants that actually makes pvc and so they’ve had price hikes all in the plumbing industry
00:05:47
and so it’s everywhere i mean you you go down the line it’s wiring those coatings pretty much everything you put into a house every stick almost every piece that you put in has had these price spikes and vast variables throughout the year [Music] you
Residential Builder Accounting
Residential builder accounting requires detailed job costing, proactive forecasting, and constant monitoring of material price fluctuations. Contractors must account for subcontractor timing, bid protection strategies, and supply chain disruptions to maintain profitability. Without strong accounting systems, even a well-bid project can lose money due to unexpected cost spikes. For guidance tailored to your construction business, consult with a qualified CPA who understands residential builder accounting and contractor financial management.
