Running a construction business is different from other goods or services-centered companies. Unlike other industries, contractors deal with project-based pricing and have to account for raw materials, labor, and local taxes on each project. Construction companies must streamline their bookkeeping processes to avoid costly errors and discrepancies. Here are some tips to help:
Organize Your Records
The organization of records is one of the most essential aspects of bookkeeping for construction companies. Because they’re project-centric, construction companies need a way to track and categorize expenses and income based on each job. This is also known as job costing. With today’s connected technologies, this can be done efficiently with defined digital workflows and notifications, allowing both parties to access detailed information quickly. A well-structured document management system speeds up project workflows, reduces risk, and helps ensure compliance with regulations. This is particularly important for commercial subcontractors, who must follow strict document retention and filing requirements.
Automate as Much as Possible
For most businesses, day-to-day accounting is fairly routine and based on a regular schedule. However, the nuances of construction accounting make it different. As a result, keeping financial records organized and accurate is especially important for contractors. For example, according to experts, a construction company might have to rent equipment and pay for labor per project. It may also be responsible for local taxes and compliance reporting. These additional costs can increase a project’s cost, making careful budgeting essential for contractors. Another challenge is the length of construction projects. Large projects can take years to complete, and contractors must manage a payment schedule based on work done and progress made.
Outsource as Needed
It’s a good idea for most business types to streamline bookkeeping processes as much as possible. For construction companies, however, it’s even more critical that financial data be accurate and timely to make informed decisions. For one, construction production often occurs on project sites rather than in a single location. This means a company must know local taxes, labor and equipment costs, and specific requirements for each job site. Additionally, contractors must manage change orders and juggle multiple projects at once.
Set a Schedule
Due to shifting costs and liability concerns, a construction business differs from a retail or manufacturing company. A good bookkeeping system helps to streamline these unique challenges by making it easier to keep up with financial data and make informed decisions quickly. Construction managers often face the temptation to set deadlines for activities that could be more realistic. Meeting unrealistic deadlines can result in significant cost overruns and schedule delays. Formal scheduling procedures have become much more common in recent years with the introduction of easy-to-use computer programs and methods for presenting schedule information. These changes have provided more incentives for contractors to utilize formal scheduling techniques.