Contractors Are Not Bankers – Too many contractors suffer cash flow shortages because they get trapped into financing their customer’s construction projects. Why use your cash, line of credit and supplier accounts to provide labor, material, subcontractors and rental equipment when you can offer your customers instant financing by accepting credit cards?
Accepting All Credit And Debit – Cards is like having an “Electronic Armored Car” on standby twenty four hours a day, seven days a week ready to take your money to your bank automatically.
The Most Common Complaint – We hear from contractors is they don’t want to pay the fees. Let’s review what it is costing you not to accept all debit and credit cards.
Cost To Accept Checks:
1. Spend time collecting a check, endorsing it, preparing the deposit slip, driving to bank, waiting in line, chatting with teller, waiting for deposit receipt, driving to your original destination, recording the payment in QuickBooks.
- Total time spent = 1 hour (X) your billing rate $40.00 per hour = $40.00
2. Vehicle cost per mile in construction estimated $2.50
- 4 miles (X) $2.50 = $10.00
3. Total cost of for one check = $50.00
4. For NSF checks double the time and money and add the cost of your NSF check charges.
5. Compare that with the cost of accepting credit cards.
Additional Sales And Profit Opportunities From Accepting Debit And Credit Cards:
1. From my experience as a construction company owner and monitoring the sales of our outsourced construction company clients accepting credit cards most of them appear to have increased sales from accepting credit cards between 10% – 40%.
2. Add on sales and the ability to offer “Instant Financing” are the two main drivers.
3. Fewer than 10% of the contractors appeared to have little or no increase in sales.
4. The biggest difference appeared to be in how well they advertise and promote it.
For Example – If Rock Bottom Construction (not a real company) could increase sales only 10% by accepting credit cards and paid a high cost of processing 5% which is higher than most merchant services providers charge the additional profit is $3,500 or 35% increase.
Having Owned And Operated – Several construction businesses I know how important cash flow is to the success or failure of any contractor.
We Have Construction Clients – Who understood the reason why we suggest most contractors accept debit and credit cards immediately and others that took a while longer.
This piece was written by Guest Blogger Randal DeHart who is a QuickBooks ProAdvisor, co-founder of Business Consulting And Accounting in Lynnwood Washington and the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. Visit Fast Easy Accounting to learn more.