Construction bookkeeping services aren’t just about tracking money; they lay the foundation for a business’s financial success. This guide looks into the best practices for construction bookkeeping, tailored specifically for construction companies.
What Is Construction Bookkeeping?
Understanding construction bookkeeping is crucial for businesses in the industry. Unlike general bookkeeping services, construction bookkeeping caters to the unique financial needs of your construction business.
Construction bookkeeping emphasizes project-specific expenses, tracking things like equipment, material, and labor costs.
With fluctuating costs, changing project scopes, and strict regulations, proper bookkeeping services in Miami will ensure financial transparency and regulatory compliance.
Key Foundations Of Bookkeeping For Construction Companies
When it comes to construction bookkeeping there are a few foundational elements worth mentioning:
Accrual vs Cash
Accrual accounting recognizes revenues and expenses when they incur, not when cash is exchanged. This method is suitable for larger construction businesses handling multiple projects. Smaller firms might prefer cash accounting for its simplicity.
It’s essential that you are able to assign costs to specific projects and do so accurately. This will help you to bill accurately and understand your profitability better.
Distributing indirect costs ensures that each project bears its share of overheads, providing a clearer profit picture.
If you’re looking for a construction CPA in Miami, ask them about these fundamentals and make sure they have the necessary construction bookkeeping skills.
The Role Of A Construction Bookkeeper
A specialist construction bookkeeper will take time consuming tasks off your plate, from tracking expenses and reconciling bank statements, to preparing financial reports. They can help you track project costs and improve billing and collections. They also provide valuable financial insight, reduce errors and give you better accuracy.
At the end of the day they’ll simplify your finances and give you better control and insights into your business performance.
If you’re planning on hiring a bookkeeper for a construction company you should consider how familiar they are with construction software, their experience in the construction sector and their reputation in the industry.
How To Do Bookkeeping For A Construction Company
Here’s a few steps to consider when doing bookkeeping for a construction company:
- Set Up Your Books – Set up a clear ledger that categorizes expenses into direct costs (like materials and labor) and indirect costs (like administrative expenses).
- Manage Expenses – Regularly update job costing to track your expenses and revenues for individual projects. Monitor material, labor, and overhead costs. Regularly update entries to ensure no expenditure goes unrecorded.
- Tracking Income – Send out client invoices on time (ideally as soon as a project is completed), ensure timely collections, and reconcile payments periodically. Cash flow is a challenge for construction businesses as you pass through periods of high expenditure and quieter times. It’s important to stay on top of your income and cash movements.
- Regular Reviews – Monthly check-ins ensure you have a clear picture of your finances. Quarterly and annual reviews will give you an overview of financial health and help you pull out bigger trends.
- Tax Considerations – A key role of bookkeeping is ensuring that all records are up to date and accurate so that your tax obligations can be met on time.
Construction Bookkeeping Software
Accounting software is invaluable for construction companies due to its ability to handle the industry’s unique financial intricacies. It streamlines financial management, offers precise job costing, automates invoicing, and efficiently manages change orders.
The software can also help in tracking time, labor, and equipment, ensuring regulatory compliance, and integrates seamlessly with other business tools.
Cost is an important factor to consider when searching for construction bookkeeping services. There are a number of factors that can influence cost, such as the complexity of your operations, the volume of transactions, and the specific requirements you have.
Remember, you get what you pay for so balance quality with affordability. A quality construction bookkeeper will free up your time and provide a good return for you.
You can take a look at our monthly bookkeeping and accounting packages. At EGomezCPA we won’t tie you down with any lock-in contracts or hidden fees. Our specialized services provide you with everything you need for your construction business.
5 Reasons To Use A Construction Bookkeeper
A bookkeeper who specializes in construction can offer you things that a generalized bookkeeper can’t, such as:
- Specialized Knowledge
They understand the nuances of job costing, progress billing, and change order management, giving you better financial control over construction projects.
- Regulatory Compliance
The construction industry is subject to specific regulations, licensing requirements, and tax laws. A construction bookkeeper is familiar with these regulations and ensures that the company remains compliant, reducing the risk of costly penalties or legal issues.
- Cash Flow Management
Given the fluctuating nature of construction work with its seasonal ebbs and flows, a construction bookkeeper can help you manage cash flow, ensuring financial stability even during lean periods.
- Specialized Reporting
Construction bookkeepers can generate industry-specific reports, such as work-in-progress (WIP) reports, equipment utilization, or project profitability analyses. These reports provide valuable insights, allowing for informed decision-making and project optimization.
- Vendor And Contract Management
With experience in the construction sector, these bookkeepers are skilled in managing vendor relationships, understanding construction contracts, and handling lien waivers or retainage, ensuring smooth financial transactions and safeguarding your company’s interests.
When To Choose Construction Bookkeeping
There are many times in your business when you may need a construction accountant or bookkeeper.
- Starting Out
As soon as a construction company is established, it’s a good idea to have a construction bookkeeper in place. They can set you up with an industry-specific accounting system from the outset, making sure that your finance department runs smoothly from day 1.
- Scaling Up
As your construction company grows and takes on more projects, the financial intricacies increase. A construction bookkeeper can handle the complexities of multiple projects at the same time, ensuring each remains profitable and financially transparent.
- Facing Regulatory Challenges
If your company is venturing into new regions or dealing with complex projects that come with unique regulations, a construction bookkeeper’s expertise can assist in compliance with industry-specific regulations and tax laws.
- Complex Financial Management
When a company starts dealing with intricate financial scenarios like joint ventures, public-private partnerships, or large-scale developments, the expertise of a construction bookkeeper becomes invaluable.
- Seeking Financial Insights
If your construction company aims to improve how it operates, reduce costs, or increase profitability, a construction bookkeeper can provide specialized reports and insights, such as project profitability analyses, to inform strategic decisions.
- Transitioning or Pivoting
If your company is considering a significant transition, such as moving from residential to commercial projects or expanding into new niches, a construction bookkeeper can guide the financial transition smoothly.
No matter what stage your business is at, it’s always a good idea to make sure your finances are in safe hands.
Our Construction Bookkeeping Services
The team at Egomez CPA has a long history of providing accounting, bookkeeping, tax, financial statements and advisory services to the construction industry. Don’t delay any longer. Talk to us today about the services that you need, that will allow you to focus on your business.