Is accounting for Construction business different?
Yes, the accounting is different for construction business due to the below reasons.
1. Payroll:
Payroll processing for construction business is little difficult as compared to other payrolls. The subcontractors will be the construction workers who have different billings, equipment’s etc.
2. Contracts:
The business is based on projects and contracts, which will have different lengths, equipment and costs.
3. Change in Budget:
The plans may change at any course of construction and these changes need to be tracked appropriately. The changes in plans or orders have a direct effect on the budget proposed for the projects.
Things to consider for Bookkeeping – Construction Business:
1. Billing for Construction Business:
Billing is more complicated for the construction business as compared to other businesses. In other industries the invoices will be like point-of-sale billing.
In construction, the billing will be based on the stages completed for a contract. The payments will be long term.
2. Costing in Construction:
Costing is more important in the construction business as the rates will vary based on the needs of the projects. It can allow the managers or the supervisors to draft a budget for future projects and improve the estimates.
Flawless budgets will allow us to analyze the cash flow and will show the overhead expenses, which will help us in calculating the accurate profit of the business.
Direction towards good bookkeeping – Construction Business:
Invoice Tracking:
The construction jobs are invoiced at different stages, it is important to keep track of invoices when they are sent, received and paid.
There will be a lot of projects going on at a time for the business, so it is crucial to track the invoices based on locations. It allows you to track the flow of cash and helps in tracking the business expenses.
Recording of transactions:
It is important to record the daily transactions like material purchase, Job Costing, accounts payables/receivables and others daily to have a proper bookkeeping.
Equipment, Repairs and maintenance, fuel, insurances and loans are also the crucial transactions to be recorded. Keeping track of the day-to-day activities allows us to have a control over the material and labor costs.
Cloud Storage for Receipts:
Make sure to have the copy of invoices and receipts handy with the help of Cloud storage.
Storing the important documents in cloud will make them readily available and make sure that it is not lost. Also store the receipts based on their categories.
It will also help meet the financial obligations for the audit.
Timely Payments:
Once the project has reached a certain stage of completion, milestones will see the payments made during that period.
This will save your time as you need not wait till the entire project is completed for the payments to be made by the client, which in other ways improves the cash flow of the project. Another added advantage of milestone is that identifying any problems in the payments can be done with ease.
Credits
Naveen A
BK & OSS Team
