Business Principles for Landscape Contracting

Steven Cohan

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351847087
• Edition: 3
• Topic: Architecture
• Subtopic: Urban Planning & Landscaping

Business Principlesfor Landscape Contracting, fully revised and updated in its third edition, is an introduction to the application of business principles of financial management involved in setting up your own landscape contracting business and beginning your professional career. Appealing to students and professionals alike, it will build your knowledge of financial management tools and enable you to relate their applications to real-life business scenarios. Focusing on the importance of proactive financial management, the book serves as a primer for students in landscape architecture, contracting, and management courses and entrepreneurs within the landscape industry preparing to use business principles in practice. Topics covered include:

• Financial management and accountability
• Budget development
• Profitable pricing and estimating
• Project management
• Creating a lean culture
• Personnel management and employee productivity
• Professional development
• Economic sustainability.

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1
Structuring for accountability

Chapter Objectives

To gain an understanding of:

1. Accounting methods
   1. Distinctions
   2. Function
   3. Applications
2. Accounting system infrastructure
   1. Chart of accounts
   2. Guidelines
   3. Classification
   4. Terminology
   5. Accountability

Key Terms

• accounting system
• accounts payable
• accounts receivable
• accrual method
• assets
• balance sheet
• balance sheet accounts
• billings basis
• cash basis method
• cash flow
• chart of accounts
• direct costs
• direct expenses
• direct job costs
• expenses
• fixed costs
• G&A overhead costs
• income statement
• income statement accounts
• indirect costs
• inventory
• invoices
• job cost figures
• ledger
• liabilities
• maximizing profit
• negative cash flow
• net worth or owner’s equity
• overhead expenses
• percentage of completion basis
• positive cash flow
• profit
• profit centers
• retainage monies
• revenue

We are all structured for financial accountability. Our personal budget allocates disbursements of our monthly income to specific categories, such as rent, utilities, mortgage, clothing, entertainment, and so on. Recording these disbursements in the checkbook represents just one facet of accounting, a process that categorizes and summarizes recorded transactions. The checkbook serves as a recording device but does not summarize and categorize the financial entries. We can accomplish the balance of the accounting process either by employing an accounting software program or by manually categorizing transactions in a ledger. A ledger is an accounting book that summarizes and categorizes information (credits and debits) from individual accounts into single locations. Information from individual accounts is posted (recorded) on a weekly or monthly basis. Ledgers enable us to easily access this summarized information. Manual entry, however, has been replaced with accounting software programs that enable electronic postings into computerized ledgers. An accounting system processes the recorded information into financial statements. These statements provide an assessment of our current financial status and details pertaining to all of the individual financial transactions. We can get breakdowns of our expenses, for example what we spent for entertainment, automobile, clothing, insurance, and so on. How effectively we manage our accounting system and utilize it to make our financial decisions determines whether we will be able to meet our financial obligations.

In the business world, meeting financial obligations and attaining profit goals require astute management of two primary components, cash flow and expenses. Cash flow represents the amount of revenue (income) a company receives from the sale of goods and services in relation to its expenses. It can be thought of in terms of the balance between income and expenses. Positive cash flow is when the amount of revenue exceeds the amount of expenses, and negative cash flow is when expenses exceed revenue within a specific time period. Expenses are all the costs associated with the sales of goods and services and those costs associated with business operations, for example for utilities. The successful management of these components cannot occur without a comprehensive accounting system. This system is the source of all the financial information that is derived from recorded transactions. These transactions include all revenue (income) from the sales of goods and services and disbursements associated with the sales and business operations.

Maximizing profit can only be achieved with an accounting system that enables management to monitor the financial status of the company on a daily basis. Unlike monthly financial statements, which are historical documents, daily financial reports provide current information ...