Accounting Tips for Your Construction Company
If you’re in the construction industry, you understand how important it is to be reliable. Your clients hold you accountable for your work. Solid construction begins with the foundation of a sound, financially stable business. So when it comes to bookkeeping for construction companies, every detail counts.
Accounting can be a challenge for construction companies due to the large, often transient workforce and varied duration of contracts. However, proper bookkeeping and construction accounting methods can go a long way in setting your business up for success.
Why Using Proper Bookkeeping Methods for Construction Is Important
Construction companies are unique because their accounting methods must address many moving parts. Separating expenditures into specific categories — like raw materials, labor and administrative costs — can often be challenging, particularly for companies performing multiple jobs simultaneously. Since no two projects are the same, bookkeepers must ensure each project’s costs align with the initial estimates.
Besides helping streamline the tax preparation process, proper bookkeeping is essential for ensuring each job you undertake is profitable. Analyzing your books and job costing functions allows you to adjust your estimation techniques for future projects. More importantly, accurate books enable you to focus on the duties that matter most instead of spending endless hours verifying numbers.
10 Accounting Tips for Construction Companies
There’s no standard accounting guide for construction companies. The best practices in the industry may not apply to every company because every construction company has different needs. However, it’s a good idea to keep these accounting tips in mind if you’re managing your company’s finances in-house:
1. Establish Separate Bank Accounts
Keeping all your money in a single account makes monitoring your accurate financial standing more challenging. Your bottom line can often appear misrepresented because operational costs like payroll and material expenses will need to pull money out of the account. Establishing separate accounts for categories like payroll and receivables gives you a better idea of how money moves through your business.
2. Back Up All Relevant Records
Receipts, invoices and other documents are essential when it comes to managing your company’s finances. If you keep hard copies of these records, you’ll need to organize them so that it’s easy to find the documents you’re looking for. But you should also have a backup plan in case your documents are lost or damaged. Maintaining a digital record of these files is the best way to ensure their safety.
3. Keep Daily Logs
Compared to waiting until the end of the month to address your accounting requirements, maintaining concise logs of your spending for each day can significantly help fill in the gaps. Daily records are especially helpful for monitoring expenditures outside of the norm, like travel costs and meals.
4. Record All Job Costs
Construction bookkeeping has many complexities, including keeping track of multiple jobs at the same time. Projects may differ greatly in length and size, which in turn leads to varying expenses. Your bookkeeper should maintain a record of every transaction that takes place during a given job. A breakdown of income and expenses for each project ensures that your company is making a profit.
5. Track Employee Hours Accurately
Another challenging aspect of accounting for construction companies is the large workforce. Your company’s team might include employees, contracted workers or a combination of both — and the construction workforce is often transient by nature. Your bookkeeper should diligently track the hours of everyone on your company’s payroll to ensure that you’re compliant with any applicable regulations.
6. Keep an Accurate Inventory of All Materials
It’s not uncommon to begin working on a construction project and realize that the job will require more labor or materials than originally anticipated. This is a normal part of the construction process. But if you’re constantly taking materials out of your inventory, your company can quickly go over budget. Keeping an accurate inventory of materials makes it easier to see where your resources are being used and budget accordingly.
7. Report on Projects in the Works
At any given time, your construction company might be taking on a variety of different projects. You should be reporting on completed projects as well as any project that is still in the works. This is essential because of the frequency of change orders and unexpected expenses that can occur during the course of the job.
8. Find the Best Insurance
Besides providing coverage for potential harm to your employees and equipment, insurance is necessary to protect against any damage to your clients’ properties. Establishing an optimal insurance plan early in the year allows you to improve your annual operating budget. Shopping around for the best plan also offers significant cost savings in the long term.
9. Utilize the Latest Technology
Software solutions specifically for construction companies can help you improve all aspects of your bookkeeping efforts. These programs offer features to track all the money coming in and out of your business. They save significant time compared to manually managing the numbers for each part of your operation, from job costing to payroll to accounts receivable.
10. Select a Financial Consultant With Construction Experience
When bookkeeping for your construction company becomes too complex for you to handle internally, partnering with Marshall Jones Certified Public Accountants And Advisors can help alleviate the challenges you face. Our team can help streamline all your accounting functions, regardless of your company’s size or specialty. Understanding the intricacies of construction accounting allows us to take a customized approach to your unique needs.
Contact Marshall Jones Outsourced Accounting Services
When you manage a construction company in Atlanta, your focus should be on the project at hand. Outsourcing accounting services can save valuable time and ensure that your business is in a position for growth and financial success.
Let Marshall Jones handle the accounting side of your business. Contact us today to start working with one of our Certified Public Accountants and Advisors.