Baywood learned of QuickBooks Contractor from PCA Group, a full-service accounting firm in Columbia, MD, that offers a wide range of services, including bookkeeping, tax planning, auditing and financial planning (see "PCA Group Delivers Expert Accounting Support").

Denise Adams, head of PCA's Small Business Solutions Group, had been working with Baywood since 2000 and was responsible for completely overhauling Baywood's QuickBook's Pro files. When Contractor Edition became available, Adams recommended it to Baywood because of the software's contractor-specific features. With Contractor Edition, Baywood would be able to track the business' overall financials, as well as the specific costs for each job.

After almost a year of using Contractor Edition, both Schoolnick and Pam Redfern, Baywood's bookkeeper, say the software has lived up to Adam's recommendations. "We have a clearer understanding of where we stand financially for each project," says Redfern. "Any time Brett or the production manager needs a cost analysis, I can quickly give them a snapshot of where we stand at that specific time."

Schoolnick and his team review the books every two weeks at the end of the pay period. "We check the cost estimates against the actual costs regularly. This information helps us stay on top of the projects," he says. The reporting offers clear and succinct comparisons between the estimates and actual costs, so that contractors can easily identify if they are making or losing money on a contract.

Cost estimates are key to Schoolnick's ability to track his financials. Project Manager Carl Goad uses Microsoft Excel to prepare cost estimates for Baywood's customers. Once the customer signs a contract based on the estimate, Goad or Schoolnick passes the printed estimate to Redfern, who manually enters it into Contractor Edition and creates a progress invoice.

Goad typically creates cost estimates based on the actual costs from similar, completed projects. The problem, explains Schoolnick, is that no two projects are ever the same. To compensate for potential unknown factors that may arise during the course of a project, Baywood throws in contingencies that will absorb unexpected delays or additional labor requirements.

Schoolnick points out that estimating labor costs is much more difficult than estimating material costs. To make the labor cost estimates more accurate, PCA Group has worked closely with Baywood to help the firm estimate the entire burden of labor. Adams has introduced tools for Baywood that reflect the overall burden of labor.

"Instead of a flat fee for labor, the costs are accrued, including paid time off, workers' compensation and other benefits and labor-related costs across all jobs," explains Adams. "This gives the business a better feel for the actual employee cost as part of job costing. It takes into account all the costs of having the employee. For example, if you pay an employee $20 per hour, but it costs the contractor another $10 per hour in insurance, taxes and benefits, etc, actual labor costs could easily be understated by one-third. A job that appears profitable without this allocation may, in fact, be losing money."


Tracking Job Profitability

Change orders play a big part in tracking a project's cost and understanding if the job is still profitable. At Baywood, every time a change order is requested out in the field, Goad writes a bid estimate for the proposed change. If the client agrees to the bid, the change order is forwarded to Redfern.

"Pam puts in the change order as a separate item under the general heading of the job," says Schoolnick. "We track each change order separately."

For Redfern, being able to include change orders with the original estimate is a great time saver and helps her keep the financials organized. "All the totals are in one place. I identify the change as a separate item and then add it into the correct category. I can see every category that is estimated by the new costs. On the estimate, the change is clearly dated as a change order. I can easily edit it and describe the change or give it a name beyond the cost code."

By adopting Contractor Edition and making time to learn its new features, Baywood has a more comprehensive view of the business' financials--and a coherent perspective of each individual project.

Find out more about QuickBooks: Premier Contractor Edition 2004.

This case study represents the individual experience of one customer. Intuit does not guarantee that results will apply to all customers.

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