Job Costing Mistakes That Break Trust with Joel Route

Reece Barnes sits down with Joel Route of Mark D Williams Custom Homes to talk about the real cost of messy job costing and how it wrecks trust with clients. They break down how miscoded invoices can turn into double billing, end of job surprises, and $60K to $70K hits to margin. You will hear simple process rules, how to keep draws clean, and why real time cost tracking changes everything. If this helped, subscribe and share it with a builder who is still doing this in spreadsheets.

https://www.mdwilliamshomes.com

Show Notes:
00:00 Intro
01:01 Joel’s role
02:34 Where costs broke
05:46 Keep it simple
07:04 Double billing damage
12:10 Fixed vs cost
17:02 Change resistance
23:39 Weekly client updates
26:39 The $70K lesson
33:24 Stop end change orders
39:34 Process takeaway

Find Our Hosts:
Reece Barnes
Matt Calvano

Podcast Produced By:
Motif Media

Transcript

0:00

Don't make things more complicated than they need to be. Don't make an extra report or don't do an extra whatever if it doesn't need to be done, the more you double up on stuff, the more there's chance for an error. Welcome to builders budgets and beers. I'm Rhys Barnes and I started this podcast to have real conversations about money in the building industry, the wins, the mistakes and everything in between. I believe builders deserve to feel confident about their finances, and that starts by hearing from others who've been through it too. This industry can be slow to change, but the right stories and the right tools can make profitability feel possible. Let's get into it. Do all right, mics are hot. Joel, we're rolling. Sounds good, awesome. Thank you sir for carving out some time jumping on the pod the old BBB builders budgets and beers. Joel, go ahead and give the listeners a little background on yourself. Little introduction. Who are you? All right? Well, my name is Joel rowdy. I work with Mark D Williams custom homes. We're a high end builder and remodeler in the Twin Cities metro area. We do about, you know, four four homes a year, three to four homes a year, and then some higher end remodels. We try and fit in as well. So my background have been in the construction industry for 15 ish years and working with Mark going on three years now. Love it came into mark from I actually worked for a remodeling company before working with Mark. And then before that remodeling company was new construction, home builder in the metro, okay, then for or with them for quite a while, and came over to Mark, thought it would be a good opportunity. And so far so good. I love it, yeah. I mean, it's kind of, I mean, we obviously love mark. We love mark. And, you know, he certainly brings a flavor and some color to a day to day, I'm sure. Yeah, for sure. Well, and it was awesome, awesome because we, I was actually just up in Minneapolis talking to you guys. We had this idea we want to do a podcast. And frankly, Joel, like your background and what you've been able to do with Mark is why I wanted to bring you on, because I thought that you had a very compelling, very interesting story, and way that you manage the financials for Mark, because you're the controller. Is that right? Yep, I do. I guess titles wise, you know, office manager, controller, but do all of the things behind the scenes keep the company going from invoicing and dealing with the customers to same thing with the subcontractors, contracts, lien waivers, all of that behind the scenes, all the stuff that's value added to the company, but all the stuff that you also have to keep going in order to keep everything moving forward. I came in. I mean, my background all the way back, went to school for engineering, so have the techie brain and to deal with that on the that side. So it actually helps with the financials, just understanding the numbers and everything and looking at that. But didn't go to school for accounting, so didn't have the accounting background. But actually, I worked for the remodeling company, did the same thing in that role, and got into the financials and working in QuickBooks. And big thing with Financials is, I mean, you can understand the numbers and look at all the different reports, you know, P and L, balance sheet and everything, but it all breaks down to the math, and making sure that all the math works and everything adds up. So understanding how all that works together has helped me, whether I'm an accountant or not, and then we go forward from there. But yeah, big thing with Mark coming in and where I was hired for is they had an issue with keeping track of job costs. We're a cost plus builder, so all of our books are open to the client, and they can look at that, but we had a big issue. Or my previous person had an issue with doing the draws and making sure that all the costs were recorded correctly. Sure, we were using, and still use it for scheduling and everything, but they were using builder trend and doing the draws through builder trend, sure. But builder trend, good, bad or otherwise, it pushes data into QuickBooks. It's not very good at pulling data into QuickBooks sure from QuickBooks Sure, so other person would do the draw, another invoice would come in, say, I want to get that subcontractor paid for the month so they don't have to wait for another month to get paid to try and add it. But then had issues with that, so I. And getting all the data, and then she would miss that, it would be accounted for correct totally. Okay, so let's break that down. Because I think, like, a this is, like, a huge component of being a controller, right? Or at least, like running that title of a controller is making sure that you're controlling the process right, and the flow of cash and making sure that it's all there, like, and that's what I wanted to drill into. So it sounds like there was, like, a little bit of, like, potentially a process breakdown, or like, like a continuity of data breakdown, but like, what was the challenge? So you mentioned that you guys were building invoices and then pushing receivables, pushing them into QuickBooks, but then more cost or AP would come in, and then how? What was the breakdown? How would that work? Yeah, so I'll go into that. Just wanted to go off of what you said as well. Big thing that I've learned is don't make things complicated if they don't need to be. So say it again. Say it again for those in the back, Joel, don't make things more complicated than they need to be. Don't make an extra report or don't do an extra whatever. If it doesn't need to be done, if you're doing it one time, the more you the more you double up on stuff, the more there's chance for an error totally. So what was happening is, and there was a couple different things, but one of the things was, again, previous person, she didn't really come from the construction industry. She had QuickBooks experience and understood, like the controller part of it, but didn't really understand the cost codes related to building a home. And not that you have to have, you know. I need to know all to build a home from start to finish, but I do need to understand where the lumber is, what's lumber, what's concrete, what's all that, so I can get the code Correct. Sure, big thing when it was going in, looking at the job costing was okay, I'm going to my light went off, and always, that's not to break your thought. Go ahead. Nope, all good. But going in on the job costing, and then some of them weren't correct, well, then, because we can get into adaptive and how it helped, the are sworn for the construction statement that costs. Then if it wasn't coded correctly and wasn't seeing it real time to be able to move it, then when I go to invoice for it next month, I see that, or didn't see that, I already invoiced for it, so I'm invoicing for it again because it wasn't showing up. So there was some double billing. And then get to the end of the job and you're seeing that, okay, now I double billed. Just happened to put it to the wrong cost code, but this invoice actually got billed twice to the customer, so you're losing credibility with your customer by not being able to track it real time. And it was like I said, pushing into QuickBooks, but then it wasn't showing up in builder trend. So then it looked like, Well, I haven't billed for that, so now I need to bill for it again the next month. And there was issues with that. So then ended up costing us our company money, because losing credibility. So customer, you lose that trust factor. And the biggest thing with your customer, from start to finish is they want to have the relationship and be able to trust you from start to finish, so that you know what we're doing totally when I started you, we had been using adaptive for a few months, and now we use it 100% of the time. But the big thing with adaptive on your job, costs and everything is it shows, if I change cost code, it changes and pushes and pulls real time, so I can look at all the costs related to the job and see real time that when I move it up, and then see what's left related to my initial sworn or the initial budget. So I can see how much I have left to or if I need to do a change order for the job. So totally for us to show the client then where we're at, what we're doing and going that way, versus some of the stuff was missed in the past, and it just it hurt us and hurt our relationships with the client. It really hurt our revenue, because it said, Okay, I need to make a concession to make this right where it would have been right in the beginning when had to made the concession, because the numbers get, they all worked out in the end. But it's you lost that trust factor with your client totally, and it just kind of gets you in this position to where you're like, you're trying to make the budget make sense, instead of just having the budget makes sense, right? And then it's like, okay, like you're trying to, like you're massaging all these numbers in the background, but then you're, then your mind starts to wander as a consumer, right? Which I do I want to touch on now. I want to hear kind of like the magnitude of some of these bugaboos, if you will. But before we do so, it sounds like even before, like the. Controller before, you like, just because they didn't have an understanding of the construction accounting side, which is largely job costing and being able to allocate and categorize costs appropriately and consistently. That's where this breakdown was happening, yes, and then, because they didn't see that, I put it to the wrong cost code, then it, I didn't notice it. So then, like I said, next month, then I'm going to charge for that again, because I'm going to put it to the correct cost code. And then when I'm reconciling at the end, figuring out all the costs related to job, then these are showing up for wrong cost code that wasn't a part of our original, sworn or original budget, right? And then, now, what do I have to do with this totally, I mean, big thing for me, and whatever job you're in is, like, I said, keep it simple, yeah, but it really is, is you want to look at all of your costs throughout the whole job and and as we're talking about adaptive and doing this, but yeah, I can pull up a report, or even the thing real time, and see where it is, and see book, instead of 2.1 whatever, for concrete, I put it in two point 11, exactly. I move it up, put it right there, and I can see that totally also for you guys, for the draws and the draw process is, I can do the draw. It shows line item by line item. And again, if I do it to the wrong code, I can move it up real time, and it moves it right there and shows to the customer. You export that report, and we send it right to the customer so they can see every cost related to the job, everything from there. Good thing. I mean giving you guys credit, but also it's really helped us out. Two of our last clients have been accountants, so they really got into the numbers and wanted to see where everything was coming from. Well, I can run a report that shows every single line item for the job, and send it to them so they can go line by line, through every it sorts it by subcontractor, cost, code, everything, and you send the stuff right to them so they can look at if you got any questions. If you got any questions. You come back and, yep, okay, we need to move this here, or do that, or it's all correct. And then they understand why. Totally it's like, it's like, and I hear this often from builders is, well, I mean, frankly, like, even if they are cost plus, like, some guys will be like, Yeah, I'm cost plus, yeah, I'm building draw schedules, but I don't necessarily send them every bill or invoice that I have right typically, because, like, the administrative lift that comes with it. Obviously they wouldn't be adaptive users, because we make it very easily, and I'm going against my general rule of not just shamelessly plugging adaptive but we're on the train. Joel, so we're just going to keep the wheels going. Point being is you get this level of comfort confidence right with your clients when you know that errors will happen even with AI in the equation. But then the simplicity and ease of being able to adjust that and correct it, and then to go back to a ledger with the client and say, Hey, like we erroneously coded it to this category. We build you for it, but now it is updated. You can see this here, like we are legitimate here. Well, exactly. And big thing with whether it's cost plus or fixed bid, because previous companies were all fixed bid pricing. But good, bad or otherwise, with builders, we're horrible at keeping track of costs real time. So I do have a caveat, pulling Oh, I just let me No, you're good. Keep going. Pulling that out is, you know, every single contractor has receipts in their truck they forgot to turn in. So everything. Then when I'm reconciling end of the month and seeing all these 10 different costs come up on the credit card that, oh yeah, I forgot to turn that in and that type of thing, well then I can catch it if you scan it in or do whatever, you can do it real time. Yep. So you're catching that. And the biggest like, even fixed. Plus you still want to do it monthly. And I know everybody reconciles monthly, but you got to look at the cost per job, because if you get till the end, and then, I mean, how do you know where you're at, where you're building? You got to know where the costs are going, or what your margin is tracking, right? And this is where I correct me where I'm wrong. You've obviously worked with fixed price builders on this, but it's like, it like the whether your cost plus or fixed price, it's always going to boil down to tracking cost. I don't care who you are, like, the better you can track cost on both of those models, the more money you're going to make, right? More in the fixed price camp is that when you are tracking these costs in real time, it's like invoicing and fixed price isn't a challenge, right? It's it's a it's on the schedule. It's probably predetermined in a contract, like, you know how many you're gonna do, five draws of 20% or whatever, right? It's all calculated based on the price. But as you're operating as a as a business owner, as. The builder. You can, if you're tracking costs in real time, you can start to see where you're starting to slip. Yeah, right. And also, like, for a remodel, when you open up a wall and find out stuff that I didn't know about totally either need to if it's you know, if I'm going to eat it as a contractor, or if I'm going to work out and it needs to be a change order with a customer, so I need to know how much that's going to cost versus, okay, now I'm way over cost at the end, and now I need to go to the customer when I'm trying to figure out my final invoice. Well, customer doesn't like that. They want to know real time too. Yep, exactly, exactly. And you just insulate yourself as a builder on the fixed price side, like I'm starting to slip. I can make these adjustments. Or I know that I might have anticipated making more margin on this line item or this component, but now I know that that's actually, if I hit what I thought I was going to it's actually going to bring me back to what my initial margin was supposed to be. And that's where these guys at the end, they're just like, they're tracking costs are fixed prices, like I know what I'm gonna make. It's like, Well, do you because you probably got 510, 15,000 and slippage somewhere in there, and that's enough margin impact for you to want to track your costs on to go back to your comment that I said I had a caveat to is like, builders aren't historically good at tracking costs. I as much as I would love to blame the contractor for this, it's not the contractor. I think it's the nature of the business, right? Because I don't know many other models or businesses that have as many different costs coming in for different products or projects that they need to categorize out appropriately, and the timeliness of understanding that information is super important. So that's again, just going back into it, it's like, it's not as much that, like builders are bad at it, as much as it is, like it's just a really tall order. Also, the thing with builders, though, is a lot of builders, and I've worked for them now and worked for them in the past, a lot of builders are if I'm comfortable doing what I'm doing, I don't want to change, to change, and resistant to technology. If I can do it on a piece of paper and write it down. It's better that way, or easier to do that. A lot of you know, job suits that you work with, getting them to schedule in electronically versus, well, if I just work it out and put it you know, I can do it by hand and it works just fine, totally. So Well, I mean, whatever, whatever whatever industry I know, there's a lot of people that are resistant to change. It's not just the building industry, but it's definitely we are. I mean, I get invoices mailed to me or handwritten. Yep, you guys have lien waiver tracking. This hilarious all the time. We have a couple subcontractors that you get the lien waiver sent as part of your payment through adaptive they print out the lien waiver, sign it and send it back to us. It's all it's all able to be signed electronically. All they have to do is click on the same button, pretty much, that they use to print and just click and sign it, but they print it and send it. Joe, Joel, Old habits die hard, exactly. That's brutal, I mean, but you seriously, as like as, again, I've been in software selling to builders for quite some time. It is just a head scratcher to me. I don't understand why, and I'm getting to the point in my career, and just like knowing this group as well as I do to, like, give them some empathy on it for the scheduling side, yep, the lean waiver side, to me, is just totally ridiculous. Yeah, it's just muscle memory. That's like, there's no other there's no other logical reason than it's just muscle memory. But and scheduling is always going to change, because you're always going to have, that's what I was gonna say. So that's always going to be there. But whether you're in builder trend or whatever software you're using, yeah, and especially in builder trend for us, because that's what we use for scheduling, yeah, the client portal is able to see that too. So the client wants to see when their house is going to be in, be right, right, and if it's slipping, or if I'm going to be able to move in for Christmas or be able to move in for XYZ holiday, or whatever we've, you know, said, so they, they want to know where that's at. So if it never changes, or if it never shows where they're at, then it's, it's again, back to the trust factor. If I did something on something else that maybe I've hurt the trust or relationship, and then I'm not doing that as well as all this stuff compounds and keeps going over on everything. So Joel, you're going into an awesome topic, which is client portals. But before we go into that, I do want to talk to you about or I guess, share my perspective on the scheduling side, which you kind of alluded to, which is schedules change all the time. And if you haven't like taken the time to understand or train your team and the product and how to effectively or even just prioritize updating these components, it's logical for the end user to be like, I'm gonna stick to the whiteboard and I'm just gonna tell my client in my weekly, bi weekly, monthly meeting where we're at on schedule. I literally have a buddy who's running a roofing company, and he has all the software in the world very, I mean, he's in my age. He's 30 years old, right? He's like, he's like, very forward with it. But I remember sitting we call it so where we work, we call it the cockpit, right? It's like, you've got a cockpit. He's got a cockpit. I'm sitting in my cockpit right now, right? And in his cockpit, he's got a whiteboard behind him, and I'm like, What do you like, what do you schedule on your whiteboard? There's like, was like, all the, like, the project schedules. I'm like, doesn't the software, I think he's on notify or something. I was like, doesn't know if I have scheduling. It was like, Yeah, but it's just like, such a pain to update it. And, like, it's just like, always out of whack. Like, I just like, revert to doing it on my whiteboard, because I could just, like, bop in the office, smudge it, update it, move it along. It's you have to empathize with the user right in order to make it reasonable or helpful, valuable, upsoup in the field, using their notebook and moving it in their notebook every day, exactly, exactly. And like the simpleton, the software person myself is like, Well, why don't you just get them iPads, right? Couldn't it just be easier if you just update it? And they're like, Well, maybe, but I know this is how I structure my notes on my notepad. This is my favorite pen. This is how I that type of thing. I am all about order and everything. So yeah, having your favorite pen and your favorite type, I'm all about that, and lists and using, I mean, I'm old school too. I use a piece of paper, you know, notepad, and every for thing I make, and I actually pluses or minuses on shows what I've done for the day. I make to do lists. Yeah, start of the day, or start it, you know, for the week, and what I have to do, and I actually cross them off as they get done. And it's a way that it makes you feel better about that. It shows you actually did something for the day, versus you get to time to go home, and it's like, what the heck did I do all day? And all of a sudden the day's gone well, that actually gives me a little relief by being able to cross things off. And when Mark comes in and adds four things, I can at least move that and move things up or down or prioritize based on that. But, yeah, I'm old school in that way that I use a piece of paper, but it's still it also gives you relief when you can actually cross it off when it's done totally, totally. I think that the point that you were making earlier back to like the client trust. And the reason why I want to highlight this client portal conversation is because this is one that I one that I've been kind of a talk track I've been harping on for a while, which is, like, the client portal concept is fantastic, right? It's like this. It's like, I want to keep my clients on the same page in real time, like complete transparency. Like, the intention is real and it's there, but it typically falls victim to these types of concepts, which actually, with the best intentions come, or tend to come the worst results. Meaning, like, I want to have this massive transparency to my client, and I want to show them updated schedules, because I know it's important to them to move in before Labor Day, because they have a big Labor Day party to show off the house, and it's like, really important to them, right? But then you have guys that aren't updating their information, and now we're hurting the relationship. What has been your experience with that? How have you been able to make the client portal valuable? Go ahead, yeah, we actually were lacking on weekly communication, I would say, in the past. So we've really made an effort in the last probably six months to add in, and we do it through builder trend, but use the client portal and actually set up so that we have automatic email. All you have to do is add the stuff in, but it goes out every Friday for clients. We had clients, just like I said, giving us feedback going even though Production Manager Mike in the field is sending them text updates daily on this is what's going on, or whatever. They weren't, even though they're getting that, not thinking that that's a client update and not I'm getting information. So when you put it into a summary form and sending, even if it's pretty much exactly the same information that Mike has talked to him about all week, they just feel good getting it in that one page or two page summary so that they can go through it and look at it, and it's all stuff that they can get, but it's just it's gotten us more in a good habit of being able to say, Yep, this is what we did, and put a summary together for the week, and then send it out totally. You memorialize it, you give them the too long didn't read version. It's like you have access to all this information. But then you're just overwhelmed, and you're like, as the consumer, trying to make sense of all the daily logs, and then looking at schedules and like, how does this compound there? So that's great. Okay, so you're sending out a weekly and there are some clients that are in the portal all the time. You know, we upload pictures so they can see everything that's going on on their job site or at the job but then there's other clients, and this would be more of my type of personality. I want the quick five bullet point overview. This is what you did for the week. This is where we're at. Are we on schedule? Are we off schedule? That's what I want. That's that's the way my brain works. Is I want that to be able to go for everything. So there are some people that want more detail, but no, like you said, I want the executive summary on the first I can look at the four things good, perfect, comes out on Friday. I know we're on track, or I need to have my client meeting, because maybe we're off track, and we need to go through things that we, you know, like you said, things that come up that we didn't know about initially, that, yep, we hit some bad soil, or did whatever, and it's going to be take us longer to do, or it's going to come going to cost more, and we go through that so totally Well, I think, and even on that thread of like, things that came up that you didn't catch, or even just like communicating this to the client, you made a point earlier about the last controller, right errors of billing, double billing costs at certain points. What that did to the client relationship? I wanted to hear some like, if you're willing to share some numbers, or at least, like, the level of problem that that was, and try and like, make that a little bit more contextual. Like, what did that actually look like for you guys? Yeah, it definitely hurt margin for, you know, Mark Williams, it was, there was some new construction build, and get to the end, and then the worst was, or not worst, but why it happened and why it had issues is the draws were going to title company, and that was getting in, and then you didn't notice it until the end of the build, when you're reconciling and making sure everything adds up, and then finding out that it didn't add up. So we were finding that on one of the jobs, it was 60 to$70,000 overage that, and then you have to try and explain that. And by explaining that was Mark to again, save relationship with customers. Said, Okay, I need to take some of this in the shorts to fix this relationship. So I'm again, it's directly hurting my bottom line and margin, because I'm saying this was our mistake and we're willing to eat it. But yeah, it was a, it was a big mistake. 6070 grand, yep. And it was on a couple different jobs on so 67 each, 60 to 70 each. Yeah, there was some that were a little less, but that was, there was definitely, yeah, there was multiple jobs that had errors that weren't caught until they were done and they were looking for the final payment, and that wasn't adding up to what it should have. That's a big deal. Again. We have these moments on the podcast right where we like, uncover this stuff, but that like, Okay, I think builders at some some time, some point, they can almost become desensitized to the volume and cost and income that they're dealing with, right? Because, because construction is such a low margin business, right? It's like, there, and there's just so many zeros passing back and forth. It's like, 50, $100,000 invoice here. It's like, okay, well, that's normal. That's what we pay for whatever, right? And it's 150, $200,000 income. It's like, okay, well, we have this, and we have this, and we have all these costs that we need to cover. So like, you kind of lose track of that. But then when you look at like a 50, $60,000 issue, and like, you're potentially running the risk, which is probably more times than not just eating that, and you're just for simple numbers, like a million dollar job and a 10% net profit, which is like, what you should be running, that's 50% of your profit. Yeah, you're it really hurt. This has been two years ago, but yeah, that exactly on bottom line for the year for Mark Williams, it was a it was a big pain that we had to get through, and that was going forward. Now, like I said, we're cost plus, but now me being able to check real time I put in, you know, in adaptive, run the quick you export it into Excel, I can check all the numbers and see exactly where we're running for margin for every job that we have from start to finish. Where the costs are at and where we're at if we're over the thing for and another thing that came up for clients is, again, it's cost plus, but you got to pay attention to what your initial original budget was, and if I'm gonna have any overages. And again, wait. Until the end to do the change order for client always then brings up issues with, well, I wouldn't have approved this change if I would have known this cost was coming. Yes, where that was missed. So then client at the end is saying, Well, I don't want to pay for this now, because you should have told me six months ago. Yes. So if I can see that and tell them that, hey, we're over on, you know, lumber or trim that, you know, we had to, whatever we had to do, but it's over versus our original budget, and this by this much, then I know that I can't upgrade my lighting as much as I wanted to, because I want to keep in X dollar. Mom, we had a client, and Mark laughs at it all the time, because majority, like 99% of his clients, I have budget in the beginning, but there's always going to be ads on, you know, change orders throughout that they normally go up. Client built on the lake, beautiful home, but they had a budget. And again, she was an accountant, but they had in a budget. And every month she would get that, and she would see everything that's going into the house. And they actually, when they got done, they were under their budget of what they wanted to be because they had, she had, I think it was 2.6 and that's, I am not going over that number, no matter. Yeah. And they didn't because they knew their numbers, yep. And they changed and took out, you know, whatever, plumbing fixture so that I can then use, I can upgrade my lighting or vice versa. This is such gold. And I say that because that it's so simple, right? And it's like, when you it's like, this huge heartburn and intimidating, big conversation that you have with clients, and it's cost plus, and we don't know what it's going to cost, but they have a number, and they've got a loan, and we got to hit that. And it's like, okay, well, there are conversations that are happening. And you're sitting down with a client, you're like, Okay, dear, like, you can't afford $50,000 more in cabinets than what we had initially talked about. Here's where we're tracking. We can pull from these other areas, and you might go from tile floors to linoleum for better cabinets, but they're not going to do it right. And it's like when you're having those conversations with the client, with the data, with the numbers, you are arming the client to make better decisions. Are they? Maybe not, but no balls in their court Go ahead. Whether they're making a better decision or not is up to them. Then exactly I mean, we had client is yes, I want to spend$50,000 more on tile, because I really picked out this tile, and it is what I want, and versus the original budget they saw this stuff come, you know, where, wherever they saw it, and I have to get the bug off of my screen just a second before it, before it walks right over the lens the camera, but, yeah, fun of fall in Minnesota, yeah, but no, they pick it out and they but then they know that if I'm if I'm doing this, my cost of the home is going to go up by x dollar value. And I know that, and I'm not finding it out at the end, when I picked it, didn't see what it really was going to cost, and then now I'm upset about it, versus if I'm finding it out real time, then they can have the discussion, and they're, they're fine with it, totally, totally well. And I mean, even on this topic, and you'd mentioned this a little bit earlier, I've had this I've been asking this question for a couple months. At this point, it's really been like a topic of conversation. Seemingly. It's kind of like when you see a yellow slug bug and then you start seeing a bunch of yellow slug bugs. Oh yeah, yeah. So, I guess the question that I've been asking recently, and I stood up in front of a room of people at it, was build show live, which, if you haven't been it was a really good show. I stood up in front of, like, it was like, a microphone pass to me. I stand up there talking about change orders. And I was just like, ask the audience. I was essentially like, Why do builders consistently follow the trend of invoicing for change orders at the end of the project? Because, and I want, I want your answer, but the reason I ask that is because, for someone who's not a builder, it makes zero sense to bill for change orders at the end of the pro it's like it makes you're just literally setting yourself up for someone to fight on money that they owe you, when you could just be invoicing for that throughout the process. Now the question is, why do builders invoice for change orders at the end of the project? In your opinion, I don't know why, except that it's probably easier, because then I know what all costs are. So I'm finishing up at the end of the project, and I know that I can add everything up on every bill that's come in for the for the whole cost of the project. And it's easier, quote, unquote, to do at the end. But it's not really easier, because all the invoices are coming in. We. Actually use. We do change orders throughout the process, so we don't wait till the end. Did have, like you said in the past, change orders that didn't get through, and exactly like you said, then when I'm getting my final payment at the to close out the job, that's when client says, I don't want to pay for it, yeah, versus if I'm getting it throughout the job, just like back when we're saying they know, then it's real time, and I'm going to either pick this and not pick this, or whatever. So we actually again, because we do cost plus, but we do. I have a change order calculator so it you put in cost from subcontractor, it adds in all of our fees, and then gives the cost of the change order. So then I give that to whether Angie's doing the change order, or Mike, or whomever I'm checking the cost, give them that number, and then that goes right to the client. So then they can approve it. We use builder trend for the approval process, so they can, they get the email or text, and it's, you know, they can sign off electronically through that, yep, but yeah, it all goes right through them, but yeah, we then those costs for the different line items, then I add that. Then that goes back into builder trend, or builder trend. It goes back in from builder trend into adaptive. And then that shows right up on the job cost totally. I love it well. And so again, change orders to, whoops, sorry, interrupting. But then chain orders to that all shows up in your adaptive report for your monthly draw. It shows all your change order, line item and cost per each code for each change order. So again, the client each month sees that, and I know exactly where I'm at for the job, and it's accurate, right? It's like you're essentially like you're you want to update the client regularly, right? Because more communication leads to more alignment, right? More understanding. You had mentioned like margin to like waiting till the end you're never going to increase your margin at the end of the job by doing that, all you're going to do is decrease it, right our clients, because, again, cost plus. But even if you're doing fixed bid, you still have that margin that you're working for. And if I'm waiting till the end, the only way it can go is down. No, no clients ever going to pay me more for the job because they feel good about it. Correct? Not going to pay, not going to pay more for my car, because, hey, it looks it looks nice, and I'm having fun with it, so I really should give you more money. No, that's not the way it works. No, but for us on the cost plus side, and same thing on all the change orders. Like I said, we have the change order calculator, but all of our costs that we add on to the initial the client sees all that. So they know exactly that it costs$5,000 plus our x margin and all of the line items that add into that. So then it adds up to, you know, 5500 or whatever. Totally they see that real time, so they're approving the total dollar value. And then it goes right into the cost of the job. And you can now Bill regularly as that cost is coming in, and you're not waiting for this, we're so close. Like, here's your you got two invoices left, and they're like, Okay, sweet. Like, we just paid for, I don't know what's on the last invoice, driveway, I don't know. Maybe, yeah, landscaping. I mean, all your final bill, yeah, for sure. They're like, they're seeing the house, they're seeing the product, they're seeing the invoice. They're like, Okay, this is it. And it's like, nope, here's 150 grand they're getting. They're getting excited for it, but they're not. Then you're, you're killing their excitement by doing it that way. They already have seen the upgraded tile, yeah, and the tile is now an expectation. It's not like in the moment. The moment has passed and they're like shit. Now I have to pay for this. Yep, they love it at the time, but I don't want to, you know if love it at the time, and I can approve it at the time, versus four months later. Well, now it's like you said. Now it's a part of the house and it's just been there, so now, you know, the excitement has gone down. Totally, totally. This has been great. Joel, I would say, like, in terms of what you could leave the audience with today, we've covered quite a bit, and it's all generally around, like, the value of immediate job, costing, accurate cost tracking, control mechanisms, billing appropriately. But what would you send the audience to that you think is the most important that they should be focusing on? I think a good thing for again, Mark D Williams, custom homes, and the thing that I deal with every day is different personalities, and the different way they do the job. Mark is high energy, go, go, go, all the time. Yeah, we love it. Prove this. And that's also why our clients want to work with him too, because he's got that style and go with everything. But then from me. Is, take a break, take a step back, and I'm all about the process, yeah. So make sure that you have your process right, so that it's going in and that client understands from start to finish. Mark is very good at saying cost is going to our cost of the home is going to be this much and we're going to make this much margin. We don't hide anything cost from the client, and after working with him and going through all the design and everything, they don't question that. They only question things when something goes wrong through the process correct. So if I can keep everything going smooth, because that's good way to look at my job as controller, all the stuff that we do behind the scenes is, I can't make the company money, but I sure can lose it money, because if I don't have the information right, and I'm sending it to the client, that's when the red flag goes up, or the hair on the back of the neck going, Okay, what's going on here? Did I miss something? Do I need to look at this where, if I'm setting up the expectations and all the data going to them is good, start to finish, then there's nothing to question for the whole thing. Like we said, with client that built exactly to the cost, you know, monthly draws. And she was looking at every line item start to finish, so that there was, there was no questions on anything start. So they knew exactly where everything caught, every cost was going in the home, to, you know, spray foam canister for insulation around the door. They knew exactly every every line item was there, and I could account for everything. That's awesome. Process. Yep, Joel, I'm a big I'm a big process guy, and that's the big thing for me is start to finish. If I can do a 1234, thing versus one, one, A, 45285, and that's where. That's where, then you cause that's when you get errors. Yeah, totally, totally. You gotta get the kiss method. Yep. Keep it do you is it? Is kiss? Keep it simple. Stupid or keep it stupid simple. I'm good with either way, because that's where it works. And the big thing for me, and this is kind of my background, and again, I went, you know, went to school for engineering, but also grew up in the country, and you want to, if you want to joke about country smart or whatever, but the biggest thing about us growing up and playing around is you have, there's only so many hours in the day, right? I don't want to waste time doing something that isn't a value add, even on. I mean, anybody's job, when you look at your margin, if I work 80 hours a week to do something that really should only take me 40 hours a week to do. Well, I just wasted 40 hours on it totally you said, keep it simple, stupid. If I can fix my process or streamline my process and get it to here so that I'm not wasting time and doing four reports when I only need to do one, then that's saving my time so that I can do something else. I go on vacation or go home and do that as versus working in the office for 80 hours. If it's if there's no value add to it, then I don't want to be here. If it's value added, I'll put in the hours and get the thing done, because we want to do it. But you got to show where the value is from that totally, totally. And it's like, I think there is, and you made this comment earlier in the podcast, but like, I think there's this like, badge of honor of like, this is how it's been done. Or, like, I've spent 60 hours a week tracking financials for my company, and it's like, well, yeah, but like, okay, let's just say, like, let's say you don't want to work 40 hours a week and you want to work 60 hours a week, couldn't you spend an additional 20 hours a week, like analyzing the books and making sure that they are to the penny clean, and like building these processes and like adding to it instead of just like hammering these mundane tasks. Go ahead, there are people that really are comfortable doing what they're doing and don't want to change the one of the things that I learned from you know, manager a long time ago was, if I can work myself out of a job, that's a good thing, because I'm not working into obsolescence where I'm going to be laid off. I'm freeing up time that I can take on other things that are more valuable. Correct, you know, fix fix that process so that I don't have to keep doing it, and especially when it's a mundane task that I don't like doing anyway, then I can learn a new task and do something else. It's value added the company totally I get rid of it, it's great, but there's a lot of people that say, Well, that's what I've done for 20 years, and it's a part of my job, so I don't want to get rid of it, because if I get rid of it, then I'm not gonna have a job anymore. Well, that's a crappy way to look at it. It totally is. And like, that's where I think, you know, you start to get in, like, the obligation of a business. I was just having this conversation with another, I can't remember who the contractor was, but it's essentially like, you know, you can, as a business owner, invest in your employees and help them develop skills, right? And it's like, it to your point is like, if you're what. Working yourself out of a job or doing what you're tasked to do more efficiently, then you have the ability to look at the business and go to the owner and say, like, hey, like, I think that we're dropping the ball over here. I've heard enough side conversations I'd be down now that I have time to dig into this and see how we can prevent this from happening. Right? There's your job security. And it's like, that's all business owners ever really want. Is like a team that cares, that's contributing at high value tasks. Well, example of that, and give an adaptive a plug. But former company for reconciles for credit card statements and bank statements, I would go through end of the month and enter in manually all of the charges that weren't in for the month. Versus adaptive. You're scanning it in, putting it in, making sure that information is correct. And then you reconcile same thing. You reconcile it in the month, but all that data is already in there. Yeah. So instead of taking a full day to do a reconcile, now it's only taken a 20 minutes to a half an hour, and that time is freed up. So now I can do other stuff. I can again look into more of the change order and find costs, or look at my invoices and make sure that all that data is right, make sure that everything else is right. Because if I'm I don't want to say wasting time that's not the right, but if I'm taking the time to do this job, that means that I don't have as much resources and time to do the other stuff. Correct. Correct. Um. Joel, your wealth of knowledge. I'm I'm glad, I'm glad that you could hop on the pod and share some of it with the listeners. I appreciate it. It's been fun. Of course, it's, of course it's always, it's always good to chat with the fellow midwesterner. We will. We'll be in touch soon, but thanks for jumping on the pod. All right. Thanks again. Okay. See you, Joel. Bye.