Hello, everyone. Welcome to the Cost Code Show presented by Knowify. This is a podcast where we focus on helping trade contractors and financial professionals that work in construction, run and grow their businesses. Today, I'm excited to welcome on Deb Deffert. She's a construction accounting expert and currently the the director of CAS Consulting at Woodard. Deb has a ton of experience on the ground doing accounting for construction companies. She's also an expert in helping accounting firms better serve construction clients through advisory services. She's gonna walk us through the the tricks of the trade that she's picked up along the way. So let's get started. How are doing today, Deb? Great. How are you today, Ryan? Doing really, really well. I'm excited to have you on. You. For the Yeah. Of course. So for those of you for those who aren't familiar with your work, maybe you could talk a little bit about your background and how you got here today. Sure. I'd love to share. So I started in public accounting nearly twenty years ago. I was recruited because I was really good at QuickBooks, and I just saw tons of opportunity, to really grow and scale a QuickBooks practice. So I had a great job. The firm I worked for was SS and G out of Cleveland, Ohio. And then in January of twenty fifteen, we were acquired by BDL. Boy, did my job go on steroids at that point. I was really fortunate, blessed to be asked to lead the technology team for that outsourcing practice. We grew the practice from twelve million to seventy million in in less than ten years. And just it was we were on a magic carpet ride. We just had a great time. And as part of that, I really embraced Noify, and our construction clients could leverage the product. So, it's been an incredible journey. I am now over at Woodard, and I get to help multiple firms build out their client advisory practices, CAS practices. And so that's what I do. I'm out there kicking CAS. That's awesome. I love that. So, yeah, that's a great transition. So there's a lot of definitions of CAS, so maybe you could talk about what it is, what it means, and how it's helping accountants kind of take on more of that advisory role for their clients. Yeah. So well, first of all, they first called it client accounting services and were wrapping the advisory in there. And then somebody got crazy and went to CAS, and they were calling it client accounting and advisory services. And now the AICPA has circled back, they have landed on CAS, client advisory services. And really what it is, we like to approach it here at Woodard from a three tier perspective. I don't like the word bookkeeping. I just it doesn't hold weight with me, especially if you're leveraging technology. I like to call that tier of it pre accounting. And then we have the second tier, which is controllership. So we have daily transactions. We have monthly oversight, and then we take it up to the FP and A or financial planning and analysis. So that's the tier of what CAS really is. And if you can service clients in all three areas, you really can make a difference for their business, helping them generate wealth, you know, right to the bottom line, helping them look at forecasting and budgeting and future of their business. So there's a lot involved in it, but you truly do become a part of their organization by being their trusted adviser. That's awesome. And I think it kinda leads into the next kind of the big picture topic here, which is kind of this idea of advising through uncertainty. There's obviously, like, a lot of uncertainty going on in the world today that's affecting, you know, the economy, and construction is one of those industries that's very there's a lot of inputs into a construction project. They're complex to begin with, and then you have material prices and labor supply and and all of those different things. So first of all, I wanted to get your your kind of experience as far as, like, what does insert uncertainty feel like from that kind of adviser seat when you're working with construction clients? So when we talked about uncertainty in the construction profession, First of all, let let me tell you. My my husband was in heavy excavating construction for years. Right? He retired after thirty five years of being a laborer down in the ditches, laying water and sewer lines. So I heard a lot about it over the thirty five years that he worked in the profession. And that that when you talk about that uncertainty, it's, you know, are they gonna win the job? Right? They're out there bidding it. Are they gonna win the job? Understanding and getting those monthly newsletters to see which ones you lost and which jobs you won and what that looked like. Because my husband worked for an incredibly generous construction company that because he was union, but they still paid bonuses, and and that owner really took care of of the guys. So the uncertainty of what's the bonus gonna look like for your workers this year or how do you plan when you don't know exactly which jobs you're gonna win? You know, how do you plan when you're gonna buy the new equipment? And how do you plan what are you gonna when you're gonna put folks maybe on unemployment for a short time frame? You know, we're in Cleveland, Ohio. A lot of those folks get laid off in the wintertime, and your and the cash position changes dramatically during during those winter months. So uncertainty is the unknown of when are you gonna get these jobs? How often are they gonna come in, and when are you gonna have to hire? So from an advisory perspective, it's really managing cash flow. You really have to manage it from from a to z, start to finish, whatever you wanna say, and you have to plan for a rainy day. That's awesome. Cash flow is a hot super hot topic, super popular topic with our clients, and I think the whole kind of space in general for for good reason. So maybe jumping up to that, you could talk about some of the red flags you look for in a construction business that's kinda starting to struggle, especially during this kind of, like, uncertain conditions that we're experiencing today? So one big area that I look at is if my accounts payable gets higher than my accounts receivable. Right? When you're looking at a balance sheet and you know that you're gonna have more money going out than coming in. So we really, from an advisory perspective, really look to, you know, have that egg nest or that plan for that rainy day where you are planning and you put aside money in a savings account, in a money market, understanding that things will go up and down with market prices changing. We've seen what the stock market's been doing. It's been going up, but whatever goes up comes back down. And so we we just really have to manage those expenses. So one of my big red flags is if that receivable balance is lower than my accounts payable balance, we're we're upside down already. So we wanna we wanna make sure we're managing to that, right, and paying things timely. Sometimes we can use our credit cards to extend those payables thirty days. A lot of the construction owners love to get the points on their credit card for, you know, personal travel and stuff, but that's that's one big area that I really look at. So that's great. That's a great tip. For advisers that are they're kind of in this situation where they are they're working with a struggling struggling is a harsh term, but a con a a construction company that's experiencing some volatility or some challenges, let's say. What kind of mistakes do you see them make typically? Or, like, where do they kinda go wrong when they're trying to help somebody kinda, like, right the ship or kinda navigate sorta, like, troubled waters, if you will? Yeah. So it's really important for these business owners to not treat the business like a lifestyle business and not take the cash out that they need personally so they can plan for that rainy day. So that's important. It's also important to be able to plan ahead for equipment purchases, right, so that they can do jobs more efficiently rather than with older equipment that may break down, that they lose days on the job because of variations in weather perhaps, being able to get to a job site, whatever it is. When you talk about construction, I currently not only am I a consultant for Woodard, but I also have Dauber Deffer Consulting on the side. And I have a big construction client that tears down those big windmills that are supposed to, you know, make energy that I don't know if they really actually do. But, you know, just planning with them and and understanding the the fluctuation of of the job and making sure that you know? Because we're in Ohio. They're they're tearing these things down all over the United States. But winter time gets slower. So, you know, if you're working outside in construction, so you you plan for it. Right? And I just just working alongside them, like, I'm vested. I wanna see them be successful. The more successful they are, I get paid timely. Right? It's it's really a life cycle, and they feel comfortable to call me whenever they need to to really, you know, look at what needs to happen next and closing their books on a timely basis. I try to get those books closed no later than the tenth of the month. I prefer to get it closer to the fifth, but sometimes you don't get all the paperwork and things that you need to get in. So I think that's really important. You wanna be proactive. You you cannot be reactive in these in these situations. That's the blessing of all the cloud based products that we have today. You know, the SaaS based products where, like, Noify, we can get in real time and get the information that we need today, not waiting till the end of the month and being reactive. Yeah. I love that. I love the idea of being proactive and and kind of playing offense, if you will. So let let's take the I've been a little bit doom and gloom as far as the, you know, the unpredictability and stuff like that. So maybe let's take it in a little more positive direction. So have you ever seen any kind of moments where uncertainty has actually created, like, an opportunity for a construction business owner or, you know, a business kinda gets stronger as a result of of maybe uncertainty or or opportunities that they're seizing? Well, look. I mean, I look back at something like COVID. Right? That was a real uncertainty and and not good. My husband never missed a day of work. They they never shut down because they were working outside. Right? I mean, they did shut down for the first two weeks when the government told everybody they had to shut down. But, you know, I look at a situation like that. They were working outside. They were, you know, several feet apart from each other. And so taking something like that and uncertainty and making something positive where he didn't have to go on unemployment, he was able to still bring home a paycheck every week, I mean, that's that's a really great example for sure. Yeah. Definitely. And I wanted to talk also just kind of about the idea, which I think kinda builds off of that, of kinda resilience in a construction business. So how would you kinda define resilience in a construction business? Is it, you know, money in the bank, a certain mindset, systems, you know, something something else? Would love to get your perspective on that. So one thing that comes top of mind when we talk about resilience with construction is their reputation and doing good quality work. I know that, my construction client has built an incredible relationship with many of the customers that have these windmill farms all over the US and in Canada. And once you do a really good job for one area, they're gonna refer you to like businesses, and they're gonna bring you back in to do work again. So I think a lot of the resilience comes from making sure you do good quality work. I also think that a lot of the resilience comes in when you have it doesn't have to be brand new equipment, but when you have equipment that's operating effectively and efficiently and that you meet your deadlines, whatever they are within that construction business, I think that that is shows a great deal of resilience because they can move on to the next job and the next job. And and it doesn't they don't get stuff stuck in backlog. So I think those things are really important. That's awesome. Now we're gonna talk so we've been talking, I think, kind of, like, about some big picture, kind of high level ideas. I wanna get into, like, a little bit more of a a tactics kind of conversation. So if you were advising a contractor today who's stressed about cash flow and and unpredictability, what's kind of the first thing that you would do in that, you know, initial advisory session? I think I would be looking at forecasting. I would look at, you know, historically, what types of jobs, what the jobs look like, and then I would wanna build out forecasting for them to look into the future so they had things to look forward to. Like, if they were uncertain about how many jobs would come in, I would wanna give them a nice platform to to go back and look and say, listen. If you get five new jobs in, you're gonna have to hire x amount of people. This is what the jobs look like. This is the dollars that follow them, and here's the expenses so that they can plan and have a comfort rather than having that uneasy feeling. So then they know if they only get two jobs in, they're not gonna have to do any hiring, and we're gonna be able to manage the cash flow according to how we've built out that forecast. It also helps to predict when we need to buy new equipment as well. So that's you know, those are big areas because when you talk about construction, labor and equipment are gonna be your two high areas that are gonna drive what how successful the business is. Yeah. That's awesome. That's, again, I think going to that kinda, like, proactive mindset and helping people plan, you know, it kinda prevents anxiety. Right? Because you're actually taking action on things and and you have a plan in place for what might happen. Jumping off of that again, are there so in construction, we've kinda talked about how kinda complex these projects can be. So I think kinda trying to find some clarity amidst the noise is a really sorta helpful kind of thing to do. And there's obviously a lot of metrics you can track for a construction project or or a construction business. Are there any numbers that, you know, contractors or accounting professionals think they should be focused on but are actually more of a distraction from the big picture? And then maybe on the flip side, like, what are the ones you recommend that they really kind of focus on as far as metrics and numbers are concerned? So so we talk about complexity. Right? So many of these construction companies have to have WIP schedules. That's there's a lot of complexity in determining what how how you're going to track your WIP. Right? Is it percentage of completion? Are you know, how are you doing it? And so as you determine that, you wanna stick to the one methodology. You don't wanna flip flop and and reverse back and forth. Right? You wanna make sure that you're you're really following the same methodology. I like percentage of completion. I like to book it based on how much expenses have been spent per job and and work it through on a percentage. That way, I keep all the revenue on my balance sheet, and then I move it over to my p and l with my month end closed processes based on on that percentage of completion. The big thing that I like for my construction clients to look at is the gross profit margin on these jobs because that gross profit margin is going to tell you if you will be profitable on a job or if you're gonna find yourself underneath. I'd like to do overhead allocations with it so that we can make sure that we're allocating those general things across all jobs to get a true profitability. So I I think that that, you know, we can look at key performance indicators on even net promoter scores you can do that's make sure customers are satisfied and things like that. But construction is volatile, and and if you don't have a good percentage of gross margin on these jobs, you're not you're not gonna be as you you're not gonna have a good bottom line. So and I don't really like to take depreciation into consideration until below the expenses because depreciation is just it's a it's a tax line item. It's not really cash outlay per se, so I kinda move that out of the equation when I'm looking at my gross profit margin. Got it. One other thing I wanted to ask about is job costing, which is something that, you know, it's just kind of a strength of nullify. A lot of folks come to us for for our job costing, but it's not it's not easy. It's kind of an overwhelming process. Do you have any tips on how you can kinda make it feel less overwhelming for teams? Because it does require a lot of, like, input from the field and things like that, and maybe make it feel like less of a financial exercise and how they can kinda, like, see the tangible sort of output or outcomes of, you know, job costing day in and day out. Well, there's a couple of things. You can leverage technology. Right? If you're if you're using a mobile app, you can capture receipts and code it directly to the jobs. That kinda takes that element away from a big pile of paper. Or I've seen some of these foremen on the job site with with a box full of receipts in their truck. Right? So it's it's having technology, maybe using things that have AI baked into them where that artificial intelligence can read it and get the information over. So modern technology is going to be you know, cloud based technology is gonna be a resolution, in my opinion, hands down. But the other thing you wanna keep in mind is when you're when you win these jobs and you're doing the planning for them, that you have a good template that you're using to plan out exactly what it's gonna take to get the job done so that you can price it out accordingly. Right? So you know what you're looking for your gross margin to be and that you pay attention and make sure you do change orders when things come in outside the scope of what has been agreed upon. So I think those areas are gonna be areas to to look to products like Noify to really facilitate and and make sure that you're you're capturing the information to the job appropriately. Excellent. Yeah. And I maybe I'll just jump off on that because we've talked a little bit about different tools and and technology and some things like that. And I know you're you're big on building out kind of a text a tech stack for your clients. Maybe you could talk a little bit about whether it's specific brands or types of tools that you look for or sorry, that you recommend and kinda, like, use in your, you know, in your practice to kinda help those cash professionals kinda figure out what they you know, where they should start there because I know it can kinda confusing just for some folks. Yep. Yeah. So I I'm I'm a big fan. There's let let's just start by saying there's a lot of technology out there. There's thousands of apps. But when we sit and we're talking about a construction company, we use, typically QuickBooks Online as our core in in the middle, and we bolt on Noify. So they're talking. Noify's got geofencing for time tracking. So what we wanna do is we wanna build a palace and not a Frankenstein. We don't want people to have to go into multiple places to do things. I want my construction guys to stay in Noify. I want them to do their time entry in Noify. I want them to really use the tool the way it was meant to, and then let me do the QuickBooks file because I'm the accountant. So I I really like to segregate that, but then to complement it using things like bill, formerly known as bill dot com. They have a bill spend with a credit card that you can actually use, an app on your phone. Ramp does the same thing. They're they're great about capturing that information. They have accounts payable and the spend card as well. There's, you know, there's Ro out there. There I mean, I can there I can name a lot of different apps. But currently, what I use in my personal tech stack for my clients is QuickBooks Online. I like advanced, and I like the new IES. I I think that Intuit is is spending a lot of money and a lot of time on the IES product for construction clients, and I'm very hopeful that they'll be able to build out the WIP schedules and things like that. But having, you know, QBO here in the middle is my hubcap, having nullified to complement, doing the AIA reporting, all those things that we need to do with construction, and then having a bill and a bill spend and then a payroll company, right, that you can combine all of them together in order to make sure, that it's clipping along. I don't want my clients to have to log in to five hundred different places. I want them to be able to open up their mobile phone, snap a picture of a a credit card receipt that they just spent money at the Lowe's on this particular job, be able to upload the invoices that we're getting from our vendors to pay for these materials, all in the same way as tracking those jobs, leveraging the job module so we can get true job, you know, jobs profit and loss by job. That's awesome. I think that's a really helpful kinda, like, picture that you kind of laid out there with all those different tools. Once someone has kinda this their tech their tech stack put together, they have a good they have their systems in place, the reporting is dialed in, have you seen any kinda, like, moments when a client sort of gets all that stuff connected and, like, sorta, like, the fog of of war, if you will, kinda, like, lifts away from their business? Yeah. I'll tell you I can tell you a quick story. So, my my construction client that I'm been working with for two years now, going on three, I was getting on, an airplane and getting ready to sit down, and this gentleman at really high pitch in his voice, he was really upset. I know I paid that invoice through QuickBooks Online, and he was just going. And and I finally leaned over to him, and I said, sir, I'm sorry for eavesdropping, but you were a little loud. And why don't you order a drink, relax, and I'll see what I can do to help you when we get up in the air? I'm a QuickBooks expert. Right? And so we started our relationship there. And he called me that following Monday, and I've been working for him ever since. But turning on some of these tools to help him really takes it to a whole new level. We when we turned on bill spend at the time Bill had purchased Divvy, they've now rebranded. But coding all those credit card expenses on eight different job sites with fifteen different users, It was coming back into a bookkeeper to enter them one by one by one. And when we streamlined the process and brought those transactions in through that credit card module and the and this team was coding it themselves, he you would have thought he was doing the happy pig dance. So, I mean, it makes a big difference leveraging tools the way they're meant to be leveraged. That's awesome. I it sounds like it really, like, kinda relieved a lot of stress that he maybe wasn't always aware that, you know, that was the kind of the source of the stress. So I wanted to kinda maybe jump off of that to that topic and talk a little bit more about kinda the CAS side of things and move a little bit far away from the the construction kinda company owner stuff. So one thing I wanna talk about, I guess, is the, sort of the human side of doing all this stuff. Right? We know this is a stressful industry, and being an accountant and providing these advisory services is not an easy, you know, an easy job to have. Wanted to talk about any kind of, like, tips you might have for helping folks that are doing this avoid, like, burning out and kinda trying to stay, you know, mentally and physically healthy while they're trying to deliver, like, you know, great services to their clients? Well, I think it's setting expectations, Ryan, that that, you know, I wanted to have the books closed by the tenth of the month. Yes. I would love to have them closed by the fifth of the month, but I know that there's gonna be some complexities. And I know my client well enough to know that there's always trailing paperwork. Communicating and setting those expectations as their trusted adviser is really important. And being honest with them when they're not getting things to you timely, not not in a mean way or anything like that, but to take the stress off the business owner trying to pick up things. Like, I can say, you know, to my client, would you like me to finish the WIP schedule this month for you? I know you're traveling to go bid three more jobs. So, again, if the communication, keeping open lines of communication, I use my cell phone a lot to I text with my with my clients. It's not just an email. I don't wanna hide behind that email. I wanna have open open conversations. Jumping on, Zoom meetings or Google Meets where we can have this conversation. I go out there at least once a month so that I can have face to face time with him. My husband and I will do dinner with he and his wife and the partner and his wife. So I think that, you know, you build that trusting relationship. You become part of the business. But if you don't have clear expectations and you don't are not honest and you don't try to pick up areas that they're faltering in just to help them through, that takes off a lot of stress on on both sides of the fence because I then I know I can get the month closed sooner. If he needed help with that WIP, I can knock it out faster. That's awesome. I think that's really, really, really helpful. We are getting towards the the end of the interview, so I wanted to, move into our our kinda concrete takeaway in the spirit of the show giving someone's one thing they could do this week if they wanted to to improve their business. So, like, what's one thing a contractor or someone who's advising a contractor can do this week to feel more confident despite whatever chaos may be going on around them? Well, one, if let's start with from a contractor perspective. If they're not working with an accounting professional that is proactive and is their trusted adviser, they might not have the right accounting professional. So maybe it's time to look. So I would tell them that. And and not that I want somebody to lose a job or lose business, but in today's day and age, in in the twenty first century, we have got to use cloud based technology. We have got to get away from on premise installation products because they're going away. QuickBooks Desktop is going away, and folks need to be proactive and and move to cloud based solutions. That's number one. Find that trusted adviser. Know what technology you can leverage. And then for those that are the practicing accountants, you also should be looking at your technology stack, what you're leveraging to advise your clients. What tool from a reporting standpoint are they using? Are they looking at reach reporting where they can build some custom reports? Are they looking at for impact data? Are they looking at SIFT analytics? What products are they leveraging that have built in generative AI to be able to help these these clients really grow and succeed in their construction business. That's awesome. Those are some great, I think, like, immediate immediately applicable tips. Deb, is there anything maybe you could talk a little bit before we completely close out about Woodard and what you guys do for folks who may not be aware. Sure. Absolutely. So Joe Woodard, the CEO of Woodard, has multiple business lines. Number one, we produce the world's or the US largest accounting show scaling new heights in June every year. It's fantastic for the accountant accounting profession. Over a hundred and fifty vendors on the vendor floor, a hundred different CPE credits for accountants to earn. So if you haven't or don't know about, go up go out and look at scaling new heights twenty twenty six. And then the other thing we do on running the CAS division for CAS consulting, we go into CPA and BPO firms and help them build out their CAS practice. We also have a membership for, folks if they'd like to join Woodard as a member, those singlepreneurs or smaller CPA firms. It's really great to be involved with the community. And we also help with an M and A arm to help marry people, like, not let really marry, but, you know, get folks together. Dot connector. We're not brokers, but we have lots of folks in our Rolodex that are getting ready to retire and looking to sell, and then we have others that are looking to buy. So we we dot connect and pull them together. So it's a great organization, and we're here to help build business advisers across the US. That's awesome, Deb. I think that's a great note to end on. So, Deb, thank you so much for joining us. To everyone who's watching or listening, thank you for tuning in. And if you're looking for help managing your projects and finances for your construction business, check out Knowify at knowify dot com. We'll we'll be back with another episode soon. Thanks.
