In accounting, there are two methods used to recognize revenues on construction contracts: completed contracts and percentage of completion. Note I said, "construction contracts" because when building on your land to sell, the only option is completed contract. The rationale behind the percentage-of-completion method is that you are effectively earning revenues as you make progress on the construction of the home while the client is making progress payments. So the question is, "Should I use percentage-of-completion method when I build on my customers' lots?"

 

Let's first take a look at the completed contract method. The completed contract method is a simple process:

• Costs are accumulated in a work in process (WIP) account (an asset), backed up by a job cost subsidiary, which details the cost for each house using pre-determined cost codes.
• At closing, sales revenues are recognized, and the cost of the houses is transferred from the asset account to cost of sales.
• When a contract to sell is accepted prior to the house being completed, cash receipts on the contract are recorded as deposits (a liability type account), and transferred to the revenue account at the same time the open balance due at closing is recorded.
• Taxes are paid based on actual revenues and actual cost of sales, which are recorded at closing and will be paid on the year the house closed.

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As the homebuilding industry heats up, builders are becoming concerned about the availability of labor. The unemployment rate in the construction industry as a whole reached nearly 25 percent at the peak of the downturn, and unemployment in the homebuilding industry probably surpassed that.

 

Even today, unemployment among construction workers is above the national average, but that improvement belies the real story. In truth, the rate is decrease not because of a significant increase in hiring, but because workers have left the industry. Anybody working in the homebuilding industry, from the manufacturers to the suppliers to the homebuilders, knows people who have left.

 

This is the second part of our report on the Pricing and Labor Shortage survey Builder Partnerships conducted in September 2013. The first part, which focuses on pricing issues, can be found on the Builder Partnerships website here and was reported in the November newsletter. In addition, the webinar discussing the full results and presented by Charles S. Shinn, Jr., Ph.D., can be found here.

 

Below are summary slides as an introduction to the results:

 

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For the third year, Builder Partnerships is hosting a booth on the show floor, featuring several of our manufacturing partners. In addition, we will once again be offering educational programs, making our booth a destination spot for show goers.

 

Manufacturers who are interested in showcasing their products should contact Monica Wheaton at monica@builderpartnerships.com

Builders should plan to stop by the booth to attend one of our seminar sessions and learn more about the great programs Builder Partnerships and our manufacturer partners have to offer. 

 

Exclusive Plum (SW 6263), a sophisticated violet, is Sherwin-Williams Color of the Year 2014. The hue, a balance of cool blue and feisty red with a splash of gray, pairs well with a variety of styles to create color schemes suitable for any room.

 

"This dusky, filtered violet is refined without being stuffy, elegant yet easy, and layered with romantic potential."

Jackie Jordan, Sherwin-Williams director of color marketing

 

 

 

Exclusive Plum has an amazing quality and can be adapted for nearly any space, whether used as an accent or for an entire room. Here are some ideas on where to use Exclusive Plum in your home:

• For a cozy, masculine den, we recommend pairing this color with accents of copper and well-worn leather.
• Exclusive Plum can also be layered with gold, gray and white for an elegant, dreamy bedroom.
• It's great highlighted against white subway tile and chrome fixtures for a statement master bathroom.
• Pops of magenta and chartreuse can liven up Exclusive Plum for a more energetic space and when paired with creamy whites or other neutrals, the mellow yet purposeful purple can turn any space into a refreshing retreat.

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