The Peavy brothers share their bookkeeping secrets
When David and Michael Peavy inherited their father's electrical contracting and services firm, Texarkana, Ark.-based Artex Electric, almost 20 years ago, they not only assumed responsibility for the physical part of the business but also took on the books. For the past 38 years, the bookkeeping arrangements have stayed in the family — starting with their mother in 1967 — even though no one in the family had been formally trained in accounting. Their mother's previous experience was running the household. “Does that count?” asks David, electrical engineer and Artex CEO. Michael, CFO, holds a master's degree in business.
Although the brothers also have no formal training in accounting, they seek out a variety of sources to help them stay on top of their financial game. That means keeping up-to-date on tax law, networking with other electrical firms that do their own books, and occasionally consulting a certified public accountant (CPA) when problems arise as well as for the year-end audit. Although they admit keeping their own books in order is a challenge, the brothers say it pays off — in the time and money they save by not having to outsource accounts and payroll. Most of all, they like maintaining control over their small business.
Keep current. Not only is it important to the Peavy brothers to keep up with changes in tax laws, but they're also careful to take care of business transactions as they arrive. With Artex's system, they keep daily tabs on accounts receivable and payable. One advantage of this arrangement is being able to make payments when they're due — and not weeks before — and to properly apply discounts. “We can tell who owes what that day, that second,” Michael says.
The brothers also keep a tight watch on payroll. Currently, Artex employs 31 workers, but that number varies from 25 to 75 depending on the season. With staffing levels constantly in a state of flux, it's vital that the payroll system remain flexible enough to easily adjust at a moment's notice. For example, if they give an employee a raise, that information is reflected on that person's paycheck almost immediately. However, if they had to coordinate those arrangements through an outside vendor, it might take weeks to accomplish the same end result.
Artex's system is also flexible enough to accommodate its particular way of doing business. “Some of our guys may buy a tool, and we'll payroll deduct it,” David says. “Even though that sounds like a small thing, if you had an outside service doing that, it would be a lot bigger deal.”
Seek help from others. Reliable office personnel are also a big part of Artex's success in managing its own books. Michael handles the lion's share of the bookkeeping duties, but he also has one other full-time person working for him as well as a customer service representative who writes out work orders. But for the tougher questions, he doesn't let the company go it alone. He consults with a CPA that will answer any questions they have throughout the year and closes out the books at the official year-end. “At every quarter, I have him look at our quarterly reports,” Michael says. “And then he comes in at the end of the year.”
There's no shame in asking a professional accountant for help. For the brothers, staying within the bounds of the law is just as important as staying in the black. Sometimes software systems can act as a guide to setting up the system, but to be sure, they always consult the tax law. “You can really get yourself in trouble if you don't pay sales tax right, or you don't pay your withholdings on time,” David says. “If you don't do everything right, you're going to get into trouble.”
Having to switch gears between the electrical Code and tax codes isn't always an easy transition. For the brothers at Artex Electric, at times it can be downright frustrating. But to keep their business going for another 38 years, they put in the extra effort to do it right.
PROFILE: Artex Electric
Years in business:
38 in commercial, industrial, and residential
$3.1 million (year ending Sept. 30)
Two full-time (one customer service representative fills out work orders)
Hardhat Management System from Hardhat, Inc., Memphis, Tenn.
Sidebar: Know the Other Codes
Just as the NEC is the foundation of any electrical project, the government's tax codes are the building block for any useful bookkeeping system. Here's how the Peavy brothers stay current on the other codes.
From the horse's mouth — The IRS sends out mailings regarding any changes in tax law. The government agency also has a Web site (http://www.irs.gov/) with information for small businesses. Or you could attend an accounting class offered at your local community college or university.
In the same boat — Learn from others, and others can learn from you. Network with electrical contractors similar in size. “A lot of people have the same problems,” says David Peavy, CEO.
Use your tools — You don't have to have a background in accounting if your software does. “Sometimes the software systems really help,” David says. “You just have to go through the process of keying in all the data.”