There’s no doubt that the construction industry is a complicated beast. Anyone working in the industry knows that there are always a hundred and one different things to take care of with every job.
The last thing you want on top of all that is accounting headaches. In this article, we’ll teach you the basics of construction bookkeeping so that you’ll be more confident you’ll get your books right the first time.
Accounting is Project-Based
If there’s one thing to know about bookkeeping in the construction industry, it’s that everything is project-based. The nature of the construction industry is that there are typically a few large-sized projects that a company’s financials are centered around.
In order to do bookkeeping efficiently, accounting has to be done within the scope of each project. That enables the company to get a birds-eye view on the cash flow and profitability of each individual project. This is crucial information for managers to know, so that they can see whether or not a project is getting too far into the red.
Compare this accounting strategy to that of a more normal industry, such as the restaurant business. As a general rule, the monthly expenses, revenue, and profits of the restaurant business will be relatively constant, or there will be a pattern to it. There might be some seasonality, such as more income in the summer when more people are eating out, or around the holiday time when people treat themselves and their families a bit more.
Location, Location, Location
Another thing to keep in mind is the location of the job site. Some construction projects extend across multiple locations.
You want to do your accounting based on each job site for the same reasons that you would want to do your accounting on a project basis. You want to know whether each location is in the red or on track to make a profit.
Gone are the days when accounting costs had to be tracked in Excel or a little black book. Nowadays, there is a myriad of different software for pretty much every business function.
The same goes for accounting. If you’re going to do your bookkeeping in house, then you need top of the line software.
Consider Outsourcing Bookkeeping
Last but not least, you need to consider outsourcing your bookkeeping. Remember that accounting is an important and complicated beast.
In order to keep your books in order, it is usually well worth it to invest in professional services if you don’t have the time yourself.
Now that you know the basic principles of construction bookkeeping, all you need to decide is whether you’re equipped to do it in-house, or whether you want to outsource this task.
If you end up doing bookkeeping in-house, remember to leverage the right software while splitting things up according to each project and each job site.
If you do decide to go the outsourced route, then be sure to check out our services page.