Bookkeeping for construction contractors helps in the tracking of each job and how it influences the company overall. It comes with it’s own unique characteristics since the costs from labor, transportation, equipment, materials, insurance, and so forth must all be accounted for in order to complete the bid process. When your bookkeeping is accurate and done in an effective manner you can maximize the profits of your company. Continue reading to find out the specialties that construction contractors face in the bookkeeping realm.
Because the nature of a contractors business revolves around projects dealing with billings, production, and/or labor and the financial focuses always change, it is absolutely crucial to stay organized with bookkeeping. In addition to this, a large portion of a contractor’s job is to make sure that the bids are rational and the costs are controlled. In order for this to happen (s)he needs to make sure that the tracking for costs is accurate.
Due to the nature of this business production happens on multiple various job sites and labor and equipment moves around frequently which causes mobilization costs. To add to the complexity, each job site might have varying wage rates, as such the labor and equipment costs, that need to be taken into consideration and reflect the rates for each job site. Production is also not very predictable like in other industries because of all the factors that go into hand that are also constantly fluctuating (i.e. market demand, supply of material, etc.), so the cost of production changes often and requires careful tracking. Likewise, it is important to then be able to take all of the variable information and create an analysis that helps create sound business decisions.
Something that is useful as a result, is to use job costing in order to be able to see how estimates and budgeting can be improved. Job costing as a whole consists of individual projects, cost types, and cost activities where a more accurate cash flow analysis is a result.
Contracts for construction can vary in lengths, and many of them can be long-term, lasting even several years, which is a lot longer than many other industries. It is common for construction contracts to have terms that permit thirty to ninety days for invoices to be paid. As a result of this, contractors must have accurate reports that track the costs and have funds available at all times to not go into debt.
All in all, it is vital for construction managers to keep clean, accurate books on hand in order to not lose track of anything and forecast accurately, but by nature of the business this is complex to do. This is why hiring a professional bookkeeper is so helpful and important. Here at Sound Bookkeepers we specialize in your type of business and have years of experience. You can rest assured that we have you covered.