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How would you react if your accountant told you, “We really should do something about your current ratio, it’s way too high and it’s costing you money?” Would that statement send you into a moderate panic: “Good Lord, how much time do I have, will I make it?" Or would you take it as a message that the company is holding too much cash and it should be invested or paid out as a bonus.
It’s not unusual for a small contractor and builder’s financial statements and tax returns to use the completed contract method, which doesn't recognize the profit on a particular job until the job is completed and closed. But for someone who builds five houses a year, this can easily create a 50% swing in a sales statement: one week sales can be $1.6 million, but two weeks later, for the same amount of business, the number can jump to $2.4 million.
For a remodeler who bills for work as it is completed, using the completed contract method is cumbersome and ineffective. He should be using the percentage of completion method, which recognizes costs and profits as they are earned.
There are advantages to both methods, but you need to understand the differences.
Your accountant needs to understand the workings of your company: how jobs come about, how you track job costs and where you charge warranty costs (many remodelers charge them to marketing, if you can believe that). This exposure to the real business will help the bean counters provide you with recommendations that are specifically targeted to your operations and avoid treating you like a home builder just because you nail things together.
You have an obligation to learn common accounting and financial management terms. When you speak the language, your company planning sessions will be more meaningful to you.
This is easier than it sounds. Ask your accountant for a glossary of terms, study them and then ask for a demonstration of how they are used.
Know the difference between a balance sheet and a statement of condition. (There is no difference). Be able to determine whether an operating statement is better than a P&L. (They're the same thing.). Be able to recognize that source and use does not refer to a job cost report on the framing portion of the Jones job.
When you understand accounting terms almost as well as the specs on a roofing job or the site work on a lot, your accountant will become a valued ally and advisor. And, at the same time, insist that your CPA become conversant in your operations and the way you do business.
Only when both of you speak the same language can you have a meaningful dialogue about your business and its finances.
If you aren't willing to do that, then you better practice saying, “It’s All Greek to Me!”
M M (Mike) Weiss, CGR, GMB, CAPS is 2003 chairman of the NAHB Remodelors™ Council.
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If you don’t speak or understand the language, you can miss out on a tremendous opportunity if, say, you're trying to conduct business in Brazil or Thailand in a situation where no English is spoken. 
