Contractor Talk - Professional Construction and Remodeling Forum banner

1 - 20 of 67 Posts

·
Registered
Joined
·
8 Posts
Discussion Starter · #1 ·
Hello, I have a question and I was wondering if some experienced business men could help me. My husband is a great carpenter but as far as being a business man he is not. I went to school to be a nurse so the book keeping part of his business is really really bad off! Right now we are currently putting the material for every job an a citi credit card. After we get paid we pay off the credit card monthly. I have downloaded quick books in hopes to start becoming organized. My question is how do you pay for materials and subcontractors ? How do you pay them prior to yourself getting paid? Do you use credit cards? Do I need to get a business loan/ line of credit and pay it back monthly? I just feel overwhelmed with how to organize everything... Please don't be smart because I know I sound totally ignorant.... just really hard up for some info hehe:thumbup:
 

·
Super Moderator
Joined
·
10,605 Posts
Most business's will start with some reserve funds. Depending on your situation, those reserves could range from $1000 to $100,000. Sounds like your husband started his with little or no reserves. There is no good answer for him. Best bet would be to get a line of credit against your home if possible.
 

·
Registered
Joined
·
4,048 Posts
I would not recommend trying to pay subs with a credit card, if you are thinking about borrowing cash against it, usually carries something like a 30% interest rate.

Your best bet is to sit down with a bank and go over your finances and your funding requirements and they can recommend several ways to continue funding your business.
 

·
Super Moderator
Joined
·
11,937 Posts
Starting to do business without working capital is very expensive, and can lead to big problems but plenty have overcome it.

http://en.wikipedia.org/wiki/Working_capital

I would consider a small business loan which will need to be backed by something of value like a home, or CDs, etc.

That way you aren't paying the ludicrous rates the CC companies charge.

Perhaps google "Quick Books Advisor" in your area who can help you set up your QB accounts, etc.

Good Luck
 

·
Registered
Joined
·
7,365 Posts
I don't see any issue putting materials on a credit card. I know a lot of people who do it both inside and outside the construction industry. Some people I know do this for the miles or rewards. You may also consider opening charge accounts with suppliers that offer terms. 10 days, 30 days, 60 days, whatever they can setup for you.

With subs, you'll need to have money in your account to pay them. I don't think a credit card is the best way to pay subs. Having money in your account could be from your operating capital reserve, taking a large enough deposit and having a correct payment schedule for your projects or having a credit line that you can utilize.

Paying yourself..... that's the fun one. Not charging enough for your work will leave you short of money to pay yourself and eventually your subs and materials. This is what we all have to keep in mind every day.
 

·
Registered
Joined
·
862 Posts
Cut those credit cards up now.

NEVER borrow money, except for a home mortgage. Easier to borrow than it is to pay it back.

Have the customer pay for the materials, or get an advance on the job.

If your husband's business cannot make it without borrowing money, maybe he's not making money.

Just my .02.

Good luck.
 

·
Wood Craftsman
Joined
·
7,324 Posts
Think about it....


We don't all have the same "cookie cutter " way of doing things-

We know absolutely nothing about you,..Zip....


You keep talking about credit cards .........obviously you don't have capital.....


Some run their business on credit, some don't........

So- can you understand why "the question " is not going to get a "winning answer"......


That is something your going to have to evaluate on your own.....personally, just on the information you gave,,,,,

Credit may be A VERY bad idea...:rolleyes:

Capital is what I believe in.....


But...


That's me....;)


Best of luck, sorry about my smart ass comments......just my nature ...


All in good fun....;)
 

·
Registered
Joined
·
8 Posts
Discussion Starter · #15 ·
LOL!! I know !! I tried to change it quickly prior to anyone noticing haha!! Look if you had two screaming kids beside you and a baby nursing at your breasts, while your typing with one hand, you would have put worse then that I'm sure :) Sheesh, Men (SMH)
 

·
Registered
Joined
·
8 Posts
Discussion Starter · #17 ·
Sorry, I may not have been clear enough. The reason I asked about a loan was to keep everything organized when it comes to purchasing materials. Usually, when we ask for a third upfront that goes to pay the sub contractors. The rest of the materials usually ends up on our citi card. We usually have a bill at the end of every month around 10,000 to 15,000 for materials only. We have no trouble paying it off but it just seems very risky to me and completely unorganized. I thought if I took out a loan I could just write checks from that business account and it would help keep everything together .....:blink: AM I making sense ? lol
 

·
Registered
Joined
·
8 Posts
Discussion Starter · #18 ·
I don't see any issue putting materials on a credit card. I know a lot of people who do it both inside and outside the construction industry. Some people I know do this for the miles or rewards. You may also consider opening charge accounts with suppliers that offer terms. 10 days, 30 days, 60 days, whatever they can setup for you.

With subs, you'll need to have money in your account to pay them. I don't think a credit card is the best way to pay subs. Having money in your account could be from your operating capital reserve, taking a large enough deposit and having a correct payment schedule for your projects or having a credit line that you can utilize.

Paying yourself..... that's the fun one. Not charging enough for your work will leave you short of money to pay yourself and eventually your subs and materials. This is what we all have to keep in mind every day.
Do you pay yourself a salary ? How does that work? lol Sorry if I'm annoying you just hard up for help !
 

·
Registered
Joined
·
1,527 Posts
What state are you in? States usually have guidelines for deposits regarding materials. I didn't see where you explained specifically what kind if business your in. Do an introduction post if you haven't.

I never pay for materials out if my pocket. I also don't pay for labor out of my pocket. Deposits being regulated is fine but keep the following payments ahead if the work schedule so you don't go into your pocket.
 

·
Registered
Remodel
Joined
·
29,619 Posts
What state are you in? States usually have guidelines for deposits regarding materials. I didn't see where you explained specifically what kind if business your in. Do an introduction post if you haven't.

I never pay for materials out if my pocket. I also don't pay for labor out of my pocket. Deposits being regulated is fine but keep the following payments ahead if the work schedule so you don't go into your pocket.
And that's a good answer.

The payment schedule keeps you positive or close to it. Supplier accounts can help. Credit cards can be convenient and a good deal, but only if you use them correctly. Lots and lots of people put materials on credit cards, I've never known someone to put sub charges on them.

No matter how you set it up, you need to keep track of what your full line of credit is, how much is used, cash on hand. Free cash flow, projected free cash flow, all that good stuff. Somebody has to know how to do financial management, or you're signed up for financial mismanagement.

Looks like you're it:laughing:
 
1 - 20 of 67 Posts
Top