Business of Building e-Source - 10/27/2004 (Plain Text Version)View Graphical Version | Subscribe to NAHB Publications | Email our Editor... Preventing Fraud: Smoke Signals and Verbal Warnings From OthersBeing personally vigilant around your office can help prevent fraud, but you can’t see everything and be everywhere at once. Maximize your watchfulness by keeping your ears open, too. Warnings From Others Do not ignore these kinds of “trouble on the home front” warnings:
Tell the reporting employee that you appreciate his or her confidence in coming to you and that you regard the information seriously. Ask the employee to keep the information confidential until you decide how to best handle the situation. Then, to protect everyone involved, seek professional assistance quickly. (Read Protecting Yourself From Fraud: Principles of Self-Defense for some tips on getting professional assistance.)
While investigating circumstances surrounding embezzlement, many fraud victims realize that they overlooked, ignored, or downplayed warning signals from others. Paying attention to and immediately following up on tips and warnings can help expose fraud and prevent additional damage. Putting asset-protection controls in place gives you more time to heed warnings from others and stop fraud in its tracks. Designing a System to Protect Your Assets
Work closely with your accountant to help implement a solid set of internal controls for your company. Because you know your business better than anyone else, you bring invaluable insights to this process. However, you probably have business “blind spots” too; that’s why it’s so important to seek a professional’s advice. Here’s a diagram that illustrates the basics of fraud prevention: Think of the three boxes (incoming funds, assets “at rest,” and outgoing funds) as assets sitting on rafts in a dry swimming pool. Your goal is to make the pool of controls (general control environment, preventive controls, and detective controls) deep enough to keep others from swimming away with your assets, but not so deep that you drown in it. The first step in designing a pool of properly balanced controls is to identify the assets you have sitting on those rafts. To do that, make a list of all of your assets and valuable information. Assets held by most businesses include:
If you begin to think of all the ways these assets could be “diverted” to improper use by embezzlers or disgruntled employees and the havoc that would create, it makes “Nightmare on Elm Street” look like child’s play, doesn’t it? Use this link to read other articles in the “Protecting Yourself From Fraud” series. Diane C.O. Gilson, CPA, CIA, is a Certified QuickBooks ProAdvisor and MasterBuilder ProAdvisor, author, trainer, and construction accounting coach, as well as a frequent speaker at The International Builders’ Show and The Remodelers’ Show. Her firm, Info Plus Accounting PC/CPA, offers bookkeeping and support services to help construction companies do more accurate and timely job costing and run better management reports. Contact Diane at 734-544-7620 or Help@InfoPlusAcct.com.
Check out Accounting with QuickBooks Pro® for Home Builders and Remodelers. From writing payroll checks to generating up-to-date income statements, this book will help you get the maximum benefit from your accounting system and put good financial controls in place. It includes a CD-ROM with a trial version of QuickBooks Pro®. Call 800-223-2665 or visit BuilderBooks to order it online. Financial Management 101: Using the NAHB Chart of AccountsThe list of accounts a company uses to record financial transactions in its accounting system is known as the chart of accounts. The way the list is set up, the order, and the grouping of accounts impact:
Many small builders view financial record keeping as a necessary evil dictated by third parties such as taxing authorities and lenders. Some builders set up their lists of bookkeeping accounts to satisfy third-party requirements—but don’t consider their own management needs. It is not unusual, therefore, to find operating expenses listed in alphabetical order and providing limited information: often, just the individual amount spent for each type of expense and the total amount spent for operating expenses. With this set-up, a company can’t analyze its performance efficiency in various functional areas. Reap the Benefits NAHB has developed a list of accounts known as the NAHB Chart of Accounts. It provides a structure that each home building company can customize for its needs. Some of the benefits of adopting the NAHB Chart of Accounts include:
Using the NAHB Charts of Accounts does not change the amount of time it takes to record transactions, but the quality of your accounting and management reports increases exponentially. By the Numbers The NAHB Chart of Accounts uses a numerical system to classify the five basic types of accounts in any accounting system: assets, liabilities, owners’ equity, revenues (sales), and expenses. The following list shows the basic groupings of accounts and the numerical coding assigned to each group. 1000 Assets 2000 Liabilities and Owners’ Equity 3000 Revenues (Sales) and Cost of Sales Operating Expenses 4000 Indirect Construction Costs 5000 Financing Expenses 6000 Sales and Marketing Expenses 7000 Operating and Management Expenses 8000 General and Administrative Expenses 9000 Other Income and Other Expenses Functions and Expenses As mentioned above, the NAHB Chart of Accounts was designed to accommodate the four functional areas (and their associated expenses) that every home building company performs: construction (indirect construction cost), financing, sales and marketing, and general and administrative functions. Indirect construction costs include all expenses incurred in running the construction operation or department, such as supervisors’ salaries, construction trucks, construction trailers, subdivision clean up, temporary toilets, etc. Financing expenses include all interest, points, and service charges related to the financing of construction activities or any other company purchases. Also included are all the costs paid at closing, including points, taxes, fees, and other miscellaneous charges. Sales and marketing expenses include all expenses associated with selling homes, such as advertising expenses, in-house and broker commissions, models, brochures, signs, etc. General and administrative expenses include all other expenses that cannot be classified in the first three categories. Examples include training and education expenses, charitable contributions, trade association dues, etc. Also included in the NAHB Chart of Accounts is a classification for rental expenses. These expenses are accumulated in the 7000 group of accounts and include all expenses related to leasing rental property. The 9000 classification is reserved for out-of-the-ordinary expenses that do not occur during the normal course of business. An example is the gain or loss from selling a company vehicle or any other type of equipment that has been used in the business’ normal operation. How’s Business? Some builders allocate the cost of supervision, financing expenses, and commissions to each house they build. They then include those expenses in the cost of sales amounts on their income statements. However, when they review their income statements, these builders don’t know what they spent on materials and labor used to build the houses. Mixing all types of costs and expenses in the same pot of soup precludes the analysis of each area. Successful builders need to know how close the actual costs of their houses come to budgeted or estimated expenses, and how well each function performed. The ability to measure, dissect, and analyze performance is invaluable for any size builder. It overcomes the uncertainty of how a business is doing, and provides guidance on where and what to focus on to improve the operation. Since the early 1970s, NAHB has been collecting builders’ financial information and publishing it in the Cost of Doing Business Studies. The information is collected using the NAHB Chart of Accounts format. If you structure your accounts under the same format, you can easily compare your financial performance to other builders in the country. Adopting the NAHB Chart of Accounts doesn’t require any extra cost, time, or training. By incorporating this tool into your business, you can significantly improve the quality of your accounting reports, support your management decisions with facts and figures, become a better manager, and see how your financial performance stacks up against the rest of the industry.
Emma S. Shinn, a certified public accountant with a Masters Degree in Business Administration, has worked in the home building industry since 1970. She is a business consultant with the Lee Evans Group, and is a popular guest lecturer at universities and home builder seminars. She is an active contributor to and past chair of NAHB’s Business Management & Information Technology Committee. Where Do You Find Articles Like the Two You Just Read?
Just go to www.nahb.org/biztools and you’ll have instant access to more than 160 business management resources. Get guidance on Accounting & Financial Management … Business Strategy …Computers & Information Technology … Customer Service … Human Resources ...and more! Resources are added weekly. Bookmark www.nahb.org/biztools so that you can go directly—at any time—to these vital business management resources. Local & State HBAs, feel free to link to www.nahb.org/biztools from your Web site. You’ll give your members instant access to these great resources. It reinforces to them that your Web site is the place to go for the information and guidance they need to succeed. Don’t Miss the Custom Builder Symposium!
Registration deadline extended until Friday, October 29 There’s still time to participate in the Custom Builder Symposium. It’s the only event offering world-class education, exceptional networking opportunities, and fun-filled activities for custom home builders. “Beyond the Tool Belt” is the theme of this year’s Symposium, which will be held November 12 through 14 at the Renaissance Esmeralda Resort and Spa in Indian Wells, CA. Here’s what’s new for 2004:
When you’re ready to take a break from learning and networking, you can unwind in the resort’s full-service spa and fitness center; explore Palm Springs via horseback riding tours of nearby Indian Canyons or by hot air balloon over the Santa Rosa and San Jacinto Mountains; and view the area’s most innovative custom homes along the Andersen Home Tour. You’ll find the Custom Builder Symposium extremely valuable whether you’re thinking of getting into the custom home building business, or you’re already a seasoned builder, remodeler, general contractor, architect, sales professional, or marketing professional, or you want to sell products and services to these professionals. Register today to guarantee your spot! Go to www.nahb.org/custom to register for the Symposium or receive more information. Online registration is available until October 29. After that date, please register on site. Questions? Need more information? Contact the NAHB University of Housing’s office of the registrar at 800-368-5242 x8338, or at registrar@nahb.com. FCC Extends Effective Date of New Fax Regulations
To address this issue, the House passed H.R. 4600 and Senate companion legislation S. 2603 cleared the Senate Commerce, Science, and Transportation Committee. However, a consensus bill failed to pass both chambers before lawmakers adjourned to campaign for the fall elections. The legislation would allow firms that have an “established business relationship” to transmit unsolicited commercial faxes to their customers and would give recipients the ability to opt-out of future unsolicited faxes. The six-month extension will allow Congress to revisit the issue in the 109th Congress. For more information, e-mail J.P. Delmore or call him at 800-368-5242, x8470. Does Your Business Measure Up?
Get your copy of the 2004 Cost of Doing Business Study and you’ll instantly see how your financial performance stacks up against the rest of the industry. The publication gives home builders a rare glimpse at other builders’ books by providing data about profitability, cost of sales, and expenses from hundreds of home builders across the country. In this 2004 edition, you’ll learn how to develop cost control systems and get tips on cutting cycle time. Start working more profitably by ordering it today. Business Opportunities From NAHB Councils and Departments
Earn National Recognition for Workforce Housing Projects This new award will recognize outstanding communities across the nation that provide decent and affordable homes for nurses, police officers, schoolteachers and other service personnel, near areas in which they work. Communities are eligible for the award if they were completed, the first model opened, or the first unit was occupied, between January 1, 2002 and October 29, 2004. Winning entries will be selected by a panel of builders, multifamily, and land development experts based on criteria including exterior and interior design, sales success, construction quality/cost efficiency, successful management of any impediments and the level of cooperation among various stakeholders. Award winners will be announced at the 2005 International Builders’ Show. For more information, including eligibility requirements and an application form, visit www.nahb.org/workforcehousing. Entries should be postmarked by October 29.
2005 Best of Seniors Housing Design and Marketing Awards The NAHB Seniors Housing Council has revamped its seniors housing awards program with 108 categories and an increased emphasis on marketing. The 2005 Best of Seniors Housing design and marketing awards program, “Celebrating Excellence … Visions of the Future,” rewards projects for their innovative designs and marketing approaches. New marketing categories include:
The contest is open to architects, builders, remodelers, engineers, and other professionals who produce or sell housing for the 50+ market. The entry deadline has been extended to November 5. Awards will be presented during the 2005 International Builders’ Show in Orlando, FL. Check out last year’s winners, read a program overview, or review the Call for Entries for a complete list of categories. NAHB members receive a discount on entries. For more information, e-mail Eucklan Matthews or call her at 800-368-5242, x8220. 2005 Pillars of the Industry Awards
Select this link for more information. Eligibility requirements and application forms are available at http://www.pillarsconference.com/. Do Business in Mexico The Mexican home building market is expected to grow to a value of $6.7 billion by 2005. Want a piece of it? Attend the 2nd International Housing Conference of the Americas, which takes place November 7-10 in Mexico City and is sponsored by NAHB International. Conference highlights include pre-arranged, one-on-one networking meetings between U.S. and Mexican company representatives, property tours of Mexico’s top builders, and interactive, highly informative panels. Simultaneous English/Spanish translation is included for all sessions. The first 200 registrants to the 2nd International Housing Conference of the Americas will receive complimentary registration to the 2005 International Builders Show in Orlando, FL. Select this link to register online for the conference. For more information, contact Matt Monjan at 800-368-5242, x8419.
The NAHB Remodelors Council is currently searching for the 2005 Bryan Patchan Scholarship winner. The candidate will be the 2005 vice chair of their local Remodelors Council and wants to learn about leadership on a national level. The purpose of the $1,000 scholarship is to help defray the costs of attending the Spring Board meeting for a local leader who may not otherwise be able to attend. The winner of the scholarship will be expected to attend the Remodelors Council meetings. The award recipient will also participate in the leadership orientation activities hosted by the Remodelors Council national leadership and staff. All 2005 vice chairmen or vice presidents of a local Remodelors Council are encouraged to apply for the Bryan Patchan Scholarship. The winner will be announced in early March 2005. For more information on how to make a donation to the Bryan Patchan Scholarship and/or apply for the scholarship, e-mail Therese Crahan or call her at 800-368-5242, x8211. Accelerate Your Sales Take advantage of these sales and marketing education events sponsored by NAHB’s National Sales and Marketing Council at the 2005 International Builders’ Show: Friday, January 14, 2005 9:00AM - 12:30PM 2005 Super Sales Rally – Selling Alive in 2005 For more than 20 years, The Super Sales Rally has been the most popular and highly attended sales education program at the Builders’ Show. This program, Selling Alive in 2005, is a continuation of that legacy. Some of the industry’s most successful sales trainers and motivational speakers will present cutting-edge sales strategies, which will motivate attendees to take action and turn ideas into strategies and techniques to sell more homes. 1:00PM - 5:30PM Sales Management Summit Join the best and brightest in a fast-paced, hard-hitting summit on sales management. Take away builder-specific ideas to improve performance and profitability. Saturday, January 15, 2005 8:00AM - 4:30PM NSMC/IRM Meet the Experts - NSMC/IRM Symposium These interactive sessions represent an informal opportunity for convention attendees to talk to sales and marketing experts and to meet speakers in a more conversational forum.
Focus on Your Future January 10 & 11, 2005 9:00AM - 5:00PM Lifestyle Merchandising, Advertising, and Promotion Strategies (IRM III) This course helps participants plan and implement more effective advertising and promotion campaigns using proven marketing, advertising and public relations, and merchandising techniques. In addition, they'll discover how to design sales centers and models that appeal to their target market, optimize traffic flow, and work as important sales tools. Register online. January 12 & 13, 2005 9:00AM - 5:00PM The Challenge of New Homes Sales Management (IRM IV) This program emphasizes the five fundamental principles that integrate the sales force into the overall marketing program: defining a clear sales plan, providing adequate guidance to implement the plan, using sales compensation as a management tool, integrating the experience of the sales manager, and maximizing the involvement of the sales manager in all marketing and sales. Register online. For more information on these programs, e-mail nsmc@nahb.com. For information on the 2005 International Builders’ Show, please visit http://www.buildersshow.com/. NAHB to Kick off “Tell A Friend Campaign”
NAHB knows you value the resources found on www.nahb.org. But do others in your company and the industry know about the wealth of resources that are just a click away? In November, NAHB will kick off the “Tell A Friend Campaign.” This is your chance to help make sure those who are connected to your business are also connected to all the news, trends, and educational and networking resources available on www.nahb.org. As part of the campaign, members who currently have a login for www.nahb.org will receive an e-mail they can forward to their colleagues explaining how and why to log in to NAHB’s Web site. NAHB will track the results of your efforts and update you on our progress in the weeks that follow. The goal of this campaign is to increase awareness and use of the NAHB Web site. The more members who take advantage of this exclusive member benefit, the more resources that can be applied to the site’s growth and continued benefit for all. Please look for the “Tell A Friend” e-mail in mid-November and be sure to forward it on! New Dates for 2006 IBS
During the recent Fall Board of Directors Meeting, the NAHB Convention Committee voted to change the dates for the 2006 International Builders' Show. The NEW 2006 IBS dates are January 11 through January 14, 2006. (The old dates were Thursday, January 12 through Sunday, January 15.) Please note that the 2005 International Builders Show dates remain the same: January 13 through January 16, 2005. Member Advantage: NAHB Members Get Preferred Association Pricing with DHL ExpressThe National Association of Home Builders has teamed with DHL to bring members a full suite of domestic and international shipping services, covering over 220 countries and territories around the globe. NAHB members can take advantage of the complete menu of DHL services, including: DHL Next Day, DHL 2nd Day, DHL Ground, International Document Express, Worldwide Priority Express, Import Express, and more. Members are also eligible for preferred DHL association member pricing. Members previously participating in NAHB’s Airborne program will be automatically transferred to the DHL program. For more information, to set up your DHL account, or for questions about your current account, contact the dedicated association hotline at 800-MEMBERS (800-636-2377) from 8 a.m. - 7 p.m. ET) or log onto www.membersales.com/NAHB. For the most up-to-date details on the Member Advantage discount program and all of the participating companies, go to http://memberadvantage.nahb.org/. Or visit http://www.nahb.org/ to explore the full range of benefits associated with membership in your local, state, and national home builders associations. For more information or to contact us directly, please visit www.NAHB.org | ©2004, National Association of Home Builders |