Twenty-five years ago, Catlett, Va., contractor Joel Barkman decided to launch his own remodeling business serving northern Virginia. He formed Golden Rule Builders, and since then the firm has grown to become a 15- to 20-person outfit that takes in approximately $5 million per year. Like many small business owners, Barkman started out personally taking care of every aspect of the business. He wasn’t just wearing many hats; he was wearing all of them.
“It started with me being out in the field, building my own homes and remodeling, and then doing the bookkeeping whenever I was forced to sit at my desk to do it,” Barkman recalls. “Later I learned more about it, and my wife did the books for about seven years. It was an area of the business I had a pulse on, but I didn’t do a great job of it.”
The same could be said for many small business owners. Because finances are such a big part of how a business runs, and because entrepreneurs by their very nature often want to have their hands in as many aspects of their venture as possible, accounting and bookkeeping too often can become just one of many tasks rather than a point of focus in and of itself. But there are dangers to letting the books and financial planning become an afterthought.
A remodeler handling his or her own business finances alone may suffice as a stop-gap measure in the beginning, but it isn’t always the best idea in the long term. For one thing, the qualities that make one a good remodeler, or even a good businessperson, don’t necessarily make that person a good bookkeeper. It’s important to work with someone who understands the finer points of finance to help.
“The reason that anyone starting a small business or already in the business should consult a certified public accountant is because of the complexities involved in forming and running a small business,” explains Jim Metzler, CPA, vice president, small firm interest, at the Durham, N.C.-based American Institute of CPAs. “If you look at all the things that a small business owner, even as small as a one- or two-person remodeler, needs to consider — the tax implications, tax advantages, and even the notion of having employees — it’s 100 times more complex than it was 10 years ago. It’s questions like, ‘What’s the best way to own my small remodeling company? Should I have a limited liability corporation, be a sole practitioner or be an S corporation or C corporation?’ Bookkeeping is one thing, but the advice, counsel and level of expertise you get from a CPA is very valuable.”
Live and Learn
As Golden Rule Builders grew, Barkman came to realize he would need help with the financial side of things. His first move was to hire a controller with some background in the industry. The controller did handle the basic bookkeeping, but Barkman soon discovered that occasional communication between the operational and financial staffs and dealing with money matters after the fact wasn’t cutting it. He parted ways with that controller and elevated part-time employee Hannah Beahm, who at the time was going to college for business, to handle the books. Proactive and eager to learn, Beahm grew into the role while finishing college and going on to earn her CPA designation. She has been with the company for nine years, and the expertise and insight she brings to Golden Rule Builders as a CPA has transformed the way the company handles its business.
“Overall, the biggest thing is knowing where we are from a financial standpoint,” Beahm says. “What often happens when you’re in a small business is that you get the day-to-day things done, and you don’t stop and look at a job to determine whether you’re making money on it or not. You can be working hard and think you’re making money, but if you’re doing something that’s inefficient, you might be losing money. You might have cash coming in and think you’re rich, but cash is not income. If you know these things in a current, here-and-now standpoint by keeping track of your balance sheet and knowing where everything is going, that allows you to make changes before it’s too late.”