How to Do Accounting for Your Construction Business 8 Steps

If you want to be able to plan better, and proactively address problems before they eat into your profit, you need this document. Get in touch to find out how we can help you with your accounting, tax and financial needs. Janet Berry-Johnson, CPA, is a freelance writer with over a decade of experience working on both the tax and audit sides of an accounting firm. She’s passionate about helping people make sense of complicated tax and accounting topics. Her work has appeared in Business Insider, Forbes, and The New York Times, and on LendingTree, Credit Karma, and Discover, among others.

Leverage Accounting Software

Accurate tracking of progress billing ensures that revenue recognition aligns with project timelines, preventing cash flow discrepancies. It also minimizes disputes with clients over billing accuracy and project milestones. Retention accounting involves withholding a percentage of payment until the completion of a project. This is common in construction contracts to ensure that the contractor completes the work satisfactorily. Accurate retention tracking ensures that your cash flow forecasts are precise and you are not missing out on payments or overpaying subcontractors. External agencies have contractor bookkeeping expertise to manage these processes effectively without any complexities.

Automate Invoicing and Expense Tracking

Alternatively, you can take advantage of a dedicated bookkeeping software solution How to Use Construction Bookkeeping Practices to Achieve Business Growth to manage your bookkeeping more easily. Some solutions, like Hubstaff, offer a free trial to provide you with an opportunity to test the software and determine if it’s the right fit for your needs. If you decide to hire an accountant, look for one with experience in your industry because they’ll know how to handle your company’s accounting needs most effectively.

Direct and indirect expenses

Opting for a solution that requires extensive training before you can use it is not only going to cost you time but also risk frustrating both you and your employees. Make sure to take advantage of these free trials when you’re shopping for your next bookkeeping solution. You can avoid this by backing up all your records using services such as Backblaze or IDrive. While there are many places where you can find a certified accountant, your best option is to browse the American Institute of Certified Public Accountants database. Revenue recognition is the process of officially recording how and when your business generates revenue.

• Accurate management of these billing methods ensures precise financial reporting and cash flow control.
• Our construction bookkeepers ensure accurate calculation and reporting of WIP, enabling informed decision-making and ensuring compliance with accounting standards.
• Having robust retainage management becomes vital when managing multiple initiatives at one time.
• Due to the value and time-consuming nature of construction jobs, payment charters have a schedule all their own.

• This involves accurately tracking employee hours, calculating wages, and ensuring that all payroll taxes are paid on time.
• You’ll have the support you need to unlock the power of your construction management software system.
• Properly accounting for retainage is essential for accurate financial reporting and effective cash flow management.
• Additionally, many of these software options can integrate with other software, such as payroll software or project management software, to further improve efficiency.
• These are some of the circumstances that emerge in the course of construction business and bookkeeping and accounting, which is the subject of this essay.
• Therefore, it is essential for construction companies to keep accurate records of all financial transactions and to file their taxes on time.

For these reasons, construction companies may need to generate separate profit and loss (P&L) statements for each project. Below are the key ways in which construction accounting differs from other types of accounting. As your https://www.merchantcircle.com/blogs/raheemhanan-deltona-fl/2024/12/How-Construction-Bookkeeping-Services-Can-Streamline-Your-Projects/2874359 construction firm oversees additional projects and engages more personnel, it gets much more critical to keep your accounts in place.