(ie a pile of random receipts, many of which clearly rescued from piles of paper trash or fished from someone's pocket on the way to the laundry or forgotten in a glove compartment somewhere)
Presumably if you're using a professional general contractor, and maybe an interior designer, they will take care of some of this for you - some, but probably not all. And in my case, of course, things were even more complicated because I had the whole family involved in helping with building and decorating the house. It was fun, but as you can see, it was messy.
My big take-aways from the process:
- Designate ONE project accountant. All invoices and receipts go to that individual.
- Make sure all contractors/subcontractors know this individual copy them on every communication related to payments owed or made.
- Get clear instructions from your lender up front on how your loan will be distributed. In my case this ended up being a construction loan on a draw system. It came as kind of a shock to me that even after being approved for the loan I had to justify and detail each expense before the disbursements would be made. And every delay in the payment process will cause problems with subcontractors so it's worth streamlining this process.
- Have a physical and digital file and put every single communication into them. Take notes on relevant phone calls and put them in the files!
- Where it makes sense, set up automatic payments and direct deposits for ongoing expenses. For example, I set up a payroll deduction that automatically filled up the construction account each month, and an automatic payment from the account for my construction loan installments. I'm sure this saved us late fees and stress in the end. Now that it's been converted to a mortgage all that has rolled over seamlessly.
- As much as possible avoid paying for things informally on the 'IOU' system. Set up a construction account and if more than one person needs access make sure they all have debit cards/checks/wire transfer details right from the start.
- And on that note - if that doesn't work for one reason or another convince all involved at the very least to avoid using cash and try not to spread expenses over several cards or accounts. It will be a mess tracking them all down later.
- Try to take stock on a regular basis, I suggest once a month. Hunt down all that financial data - send out a call for any 'forgotten' invoices, orphan receipts, paperless transactions that should be accounted for. Check on how well you're sticking to your projected budget. Look out for line items that cost more than projected and also estimate what percentage of construction (vs. what percentage of your $$!) is left. This step particularly helped us to make spending decisions nearer the end of the construction process to stay as close to our original budget as possible.
So go forth and build responsibly!