How to Do Accounting for Your Construction Business 8 Steps

Working with a certified bookkeeper or accountant specializing in construction accounting can greatly benefit your business. These experts possess in-depth knowledge and expertise in handling complex financial responsibilities such as job costing, payroll taxes, and reporting. Distinctive characteristics include project-based operations, decentralized production, and long-term contracts. Adhering to Generally Accepted Accounting Principles (GAAP) is essential for financial transparency and credibility.

What makes bookkeeping for construction companies different?

Bookkeeping enables the company to analyze the profitability of individual projects. Construction companies bookkeeping refers to the systematic recording, organizing, and managing of financial transactions and records related to a construction business. It is the process of tracking all income, expenses, construction bookkeeping assets, liabilities, and equity specific to construction projects and overall business operations. A chart of accounts is a list of all the accounts used by a company to record financial transactions. Construction companies have unique accounting needs that require specialized bookkeeping practices. This section will cover the fundamentals of bookkeeping for construction companies, including accounting methods, chart of accounts, and job costing essentials.

Compliance and Best Practices

It also lets you monitor the costs of materials, labor, and equipment for each individual phase so you can stay on budget and ensure resources are used efficiently. This approach also lets you identify any financial issues before they become bigger problems. Project-based accounting simplifies financing for construction companies by accurately tracking costs, revenues, and profits on a per-project basis. By leveraging digital invoice capture and automated approval workflows, you can streamline your invoice processing and payment cycles while eliminating the need for manual data entry. Digitizing your invoice management system allows you to capture invoices electronically, automatically extract data from them, and route them for approval without human intervention.

• Bridgit Bench is a workforce planning platform built to help construction professionals, including accountants.
• With deep-rooted expertise in the construction sector, we understand the nuances and unique challenges you face.
• Some of it is likely reserved for things like payroll, covering expenses, and paying taxes.
• Proper bookkeeping enables construction companies to track and manage these project costs efficiently.
• This transparency is vital for making informed decisions, tracking financial progress, and identifying areas that require improvement.

All You Need to Know About Construction Bookkeeping

Nothing in construction can make or break your company’s profitability quite like change orders can. You need a way to easily create and track them in your construction accounting system, so you don’t have to rely on risky handshake agreements. Submitting a formalized change order is much more reliable, both from a communications and financial standpoint. Based on your current data, project forecasting helps you predict future costs, forecast revenue, and estimate timelines. Project forecasting helps project managers prepare for potential challenges and determine how best to keep things on track.

Union payroll

• Generally, contract retainage is specified in the contract and is a percentage, typically five to 10 percent, of the total contract amount.
• Many construction companies use a “completion percentage” approach, meaning they calculate estimated taxes based on quarterly income and expense reports.
• Xero integration with banking accounts helps to access financial data without manual extracting and reporting.
• It reveals the net profit or loss, helping contractors assess revenue generation and cost control.
• Unlike industries with consistent day-to-day operations and predictable costs, construction companies grapple with a complex array of challenges.
• Sage Intacct Construction and Sage Intacct Real Estate is designed for contractors and owners to be able to manage properties and projects effectively.
• This makes keeping tabs on all the moving pieces much more complex than in other industries.

This is best for contractors who want clients to have access to cost data and project management oversight. Premier provides you with a customizable dashboard that gives you the insights you need to manage every aspect of the job. Record electronic signatures for approvals and use the cloud-based document storage tool to keep everything you need one click away. You can use Botkeeper to connect your books to your bank account and simplify reporting.

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These projects can range from building residential properties to large-scale infrastructure developments. If you need help getting started or have outgrown handling your construction company’s books on your own, schedule a call with Slate. We can help you take the right approach to managing your successful construction business and ensure you’re generating enough revenue to cover all costs while still turning a profit.

• Bookkeeping is a fundamental aspect of financial management for any business, and construction companies are no exception.
• Payment application reports, also known as pay apps, are crucial documents exchanged between contractors during payment processes.
• There are several industry-specific settings to set up progress reporting for receivables and billables.
• This section will equip you with essential tax tips to optimize your financial strategy and solidify your foundation.
• Construction companies can use historical data to estimate their costs and create a budget for each project.

Financial reports help business owners in understanding the financial standing of the business. It provides valuable insights which help business owners to take necessary business decisions wisely. Let us take a look at essential financial report in regard to a construction company. Revenue recognition is a critical aspect for construction contractors to manage their financial means effectively.