Any business that wants to succeed needs to keep good books. Without accurate bookkeeping, the accountant won't be able to use the information in the book to find profit and give financial advice. Bookkeeping is the process of keeping track of fees, payroll, and other daily costs. It's normal for business owners to not know much about the bookkeeping industry. But that doesn't mean that bookkeeping is not essential.
In fact, because of its nature, construction bookkeeping is much more necessary. The bookkeeper for a construction company has to keep track of daily costs for each project and for the business as a whole. Let's look at some of the ways that construction bookkeeping is different from other types of bookkeeping.
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Project-based Rather than Product-based
Unlike other types of businesses, construction firms tend to focus on specific projects. For a project to be profitable, every expense must be well-managed. Each project needs a different amount of time and money. Since every job is complicated, it can be hard to come up with bids that are both profitable and competitive. With this information in mind, construction companies might need to make separate profit and loss (P&L) statements for each project. And also, to do bookkeeping for the entire business as well. A construction bookkeeper has to have a greater level of attention to detail than other bookkeepers if they want to be successful.
Decentralized Workplace Rather than Fixed Location
Construction businesses often do not have a single permanent location. Instead, they work on the project sites. Since workers and equipment move from place to place, businesses must be able to decide how much it costs to move as well as set up equipment. The company must also follow local wage rates and legislation at each location. Then you may need to buy or rent equipment and have some payroll adjustments. With so many different costs, the construction business relies heavily on accurate bookkeeping.
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Good-based, Also, Service-based
Many businesses sell easily identifiable products to gain a profit. The construction industry also ends with a physical product: a home, building, bridge, etc.
Yet, there are also services that happen during the process, and, of course, expenses will be incurred. For instance, the design process during the ideation phase, consulting, finding materials, and more. This means that strict supervision is needed to keep track of expenses and figure out how much profit each service category brings in.
Long, Short, Irregular Contracts
It can take months or even years to finish a big building project. Even small projects can take longer than planned if there are problems, like a lack of raw materials or bad weather. Thus, a construction firm can't have a regular monthly payment plan. Flexible and well-organized bookkeeping is vital for every firm that wishes to keep exact financial records and understand its cash flow for profit and tax reasons.
Fluctuating Costs
In construction, direct and indirect costs are always changing. Perhaps labor and material costs shift during the course of the project's duration. To keep track of all expenses, a construction bookkeeper is essential. Since they can't stock in ahead, contractors are exposed to material price swings. Construction bookkeepers must be careful to keep track of every penny spent, even if the costs are unpredictable or subject to periodic fluctuations.
Final Thoughts
Construction bookkeeping is often underestimated. Other businesses may have stable monthly costs, but a construction company works on different projects at once. Costs of materials, payroll, and services may change, and they may have more than one location with flexible contracts. Because of this, most construction company owners need a good bookkeeping service. Since these owners are experts in building, they might want to leave the numbers to people who do construction bookkeeping.
Call us for free if you need professional help with your books. We've worked in construction, handled books, and satisfied several firms. Let us do what we do best so that you may focus on what you do.
