You can provide your foreman with several yards moved on a site last week. When asked by the same crew what that job actually earned after deducting fuel, excavator wear and tear and the late invoice from the subcontractor, the response becomes shadier. Most excavation companies lose money in that gap between production and profit, well before the tax season.
Online Accountant is designed to suit the needs of rising Canadian businesses that operate with equipment, crews and project margins, rather than spreadsheets tailored for a service operation. If you've had enough of learning about a job only to discover three months later that it barely broke even, this is for you.
Excavation is a project business in a construction hat, and as such, there are certain financial blind spots:
Equipment costs that don't get tied to the right job. The costs of fuel, repairs, and depreciation of an excavator or skid steer are frequently reported as "overhead" rather than the project they are used for.
Subcontractors and labour costs are tracked after the fact. The job is done, and the real margin is the best guess when invoices arrive.
Cash tied up in receivables while payroll, fuel, and equipment financing are late to wait for a slow-paying client.
Seasonal swings that cause cash flow to feel more volatile than desired despite strong yearly sales.
Growing revenue without growing profit, because pricing was never adjusted as fuel and labour costs climbed.
None of this is a crisis. It appears as a company that is busier each year and not any closer to being ahead.
The old days of the excavation companies were based on a shoebox of receipts and a bookkeeper at the end of the year. The money doesn't flow like that anymore, nor do the best contractors compete.
Cloud-based accounting software, such as QuickBooks and Xero, is now linked to job management, payroll and equipment tracking, providing owners with real-time visibility, rather than a report three months later. Online Accountant works in both QuickBooks and Xero, so your books are a true representation of what is actually happening on your jobsites, not a "what did we do there" reconstruction.
Not all the companies who are ahead of the game are the ones with the latest equipment. It's those companies which know their numbers as clearly as they know their sites.
Revenue is the simplest number to peruse and among the least helpful numbers on their own. These tell you more:
Gross profit margin by project: whether the projects you're bidding on are projects worth winning.
Equipment cost per project: fuel, maintenance and depreciation, allocated to the project that created them.
Labour cost as % of revenue: how the crew and subcontractor percentage cost varies as you grow.
Accounts receivable turnover: the length of time (days, weeks, months) that cash remains with the client before it becomes cash that you can use.
Overhead as a percentage of revenue: is margin really improving, or is it just top line?
Change-order profitability: is the additional work you're approving profitable? Is it the job or the profit?
Tracked consistently, these numbers turn a bookkeeping file into a decision-making tool.
Bookkeeping that depicts job costs as they happen and is not just a spring clean-up.
Tax planning, as an all-year-round discussion, not a scramble in March. It means knowing the timing of equipment acquisition and financing, current GST/HST filing, intentional planning of owner compensation and pre-planning for what you will be paying to the CRA before they demand it.
Payroll that links operator and crew pay directly to job costing, so labour shows up where it was earned.
Job costing and profitability tracking, so you can know which contracts to repeat and which ones are "cash-dropping" your profits.
Cash flow management that includes consideration of the slow months, payroll, equipment financing and receivables, so that a strong summer does not cost a bad winter.
Financial reporting to answer real questions: Does this business have enough money for another loader? Is there a need for a second crew? Should this bid be higher?
Yes. Online Accountant works within both QuickBooks and Xero, so your books stay connected to the tools you're already using to run jobs and manage your fleet.
Accounting is not just a record of what has already taken place. It provides enough time to make a decision: do you need additional equipment, a bigger contract, a different crew or just enough money left after a tax bill is paid to know you're going to need more later on. That's the transition from recordkeeping to financial strategy, and that's where the majority of excavation companies have the most potential to make strides.
When you're out bidding jobs with no idea of what your true margins will be, or you aren't seeing your books until after the end of the year, it's past time for that to change. Talk to Online Accountant about accounting that's based on how excavation companies really work.
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