When it comes to accounting for construction, your bookkeeper requires additional qualifications to have a proper insight into your needs. For example, your business will have different requirements for financing, project management, bidding, and payment schedules. In addition, you will have different expensing needs for subcontractors, equipment, supplies, and site management. To ensure your business needs are being met with complete accuracy, you need a bookkeeper who understands all the nuances of accounting for construction.
Major Components in Accounting for Construction
The best practices for accounting in the construction industry differ from those of the average small business. For example, you will likely have multiple suppliers, multiple sites, subcontractors, employees, and a fast-moving environment with change orders, irregular invoicing, and large expenses for materials and equipment.
Your bookkeeper should use the accepted best practices for construction accounting, even if those practices are not always the easiest methods:
Allocating project costs through the job costing method. It takes a skilled bookkeeper familiar with construction projects to use this method instead of a single income statement. The income statement is far simpler, but it gives you no insight into the performance of each project.
Appropriate software and using its entire functionality. Some software is better at capturing the construction industry’s needs than others. Your bookkeeper should also take advantage of the features that make your life even easier, such as receipt capture so that you can continue working without interrupting your day.
Accrual accounting. Cash basis accounting is simple but runs the serious risk of miscalculating your profit and losses. However, combined with the percentage of completion method, you will have the most accurate picture of your business, remain tax-compliant, and improve your bottom line.
Working Numbers Specializes in Construction Bookkeeping
When you invest in a bookkeeping partner specializing in construction bookkeeping, you give your business the greatest opportunity for profitability and growth. Using the best practices when accounting for construction can reduce your overhead costs, improve inventory management, identify growth opportunities, increase your attractiveness to lenders, solidify your cash position and keep the IRS happy.
If the thought of using advanced accounting techniques overwhelms you, Working Numbers can help organize and maintain your books, ensuring you spend your time where it is most needed – managing your business and job sites. Take the stress out of accounting with the help of Working Numbers and get yourself out from behind your desk and back out into the field.