top of page

All You Need to Know About Construction Bookkeeping

Updated: Jun 26

Do you own a construction business? If so, you know it is a tricky task. Your role as an industry leader involves smart money management. The construction industry is known for its ups and downs. It has slow payment cycles and an uneven cash flow.

Keeping track of costs, income, and other financial details is key. It's the bedrock of steady growth and healthy cash flow. In this guide, we'll dive into the world of construction bookkeeping. We'll focus on what it is and its importance. We're also going to explore the basic terms used in construction accounting and the vital role of financial reporting. By the end, you'll have a clearer understanding of how to navigate construction accounting more effectively.

Table of content:

Construction Bookkeeping

What is Construction Bookkeeping?

Construction bookkeeping is not like everyday bookkeeping. It calls for a special set of knowledge about the construction world. There are unique parts to it, like job costing, project accounting, and Work in Progress (WIP) analysis. These bits make construction bookkeeping different from the rest.

The Importance of Construction Bookkeeping

Construction bookkeeping is not a simple task. It involves tracking long-term projects. It also involves handling the cost of labor and materials. All while adjusting to changing costs. Why is it so important in the construction field? Let's break it down into three simple reasons.

Job Costing Accuracy

Getting job costs right is key. Still, around 75% of construction firms don't keep accurate job cost records. This can cause costly mistakes. Construction bookkeeping can help. It gives you a clear picture of a project's real cost. This can help you make smarter business decisions.

Regular Work in Progress (WIP) Reporting

Construction projects often last months or even years. Skipping WIP reports can lead to project delays. It can also hurt profits. A regular WIP analysis is important. When combined with construction bookkeeping, it offers key insights. These can cover project progress and financial health.

>> Learn more: Free Sample WIP Report

Good Cash Flow Management

Cash flow is key in construction, but 85% of construction businesses face cash flow problems. Effective construction bookkeeping tracks invoices, payments, and expenses, facilitating better cash flow management.

Don't just take our word for it, though. Read more about why construction bookkeeping matters on our blog.

How Do You Understand Basic Terms in Construction Accounting

Every business needs accounting, but construction has its own unique demands. Let's dive into the key concepts that set construction accounting apart.

  • Job Costing

Every project or "job" in construction has its own costs, such as materials, labor, subcontractor costs, and "overheads." Job costing is the process of keeping track of these costs for each job. This is important for managing budgets and making money.

  • Overhead Allocation

Overhead costs, such as office rent, utilities, and administrative salaries, don't directly contribute to specific projects. However, they are required for running your business. Allocating these costs to your jobs helps you accurately understand the full cost of each project.

These two methods are the most common ways to do accounting in all fields. In cash accounting, income and costs are tracked when money changes hands. Accrual accounting, on the other hand, keeps track of transactions when they are made or spent, regardless of when money changes hands.

Construction uses these methods. The completed contract method recognizes revenue and expenses as the work is completed, whereas the percentage of completion method does not until the contract is fully completed.

Common Financial Reports in Construction Accounting

Financial reporting offers insights into your company's financial health and operational efficiency. Here's what you need to know:

Monthly Financial Reports

These monthly reports typically give you a comprehensive view of your business's financial performance.

​Balance Sheet

Income Statement

Cash Flow Statement

At a given point in time, it provides a snapshot of your company's assets, liabilities, and equity.

This report displays your revenue, expenses, and net income for a specific time period.

The cash flow statement shows how money comes into and goes out of your business.

Pain Points in Construction Bookkeeping

While the unique aspects of construction bookkeeping provide several benefits, they also come with challenges. Here are some common pain points you might experience:

  • Time management:

Construction bookkeeping can be time-consuming, especially when juggling multiple projects.

  • Financial accuracy:

Due to the complex nature of construction finances, errors can easily occur, which can have a substantial financial impact.

  • Cash flow:

The long-term nature of construction projects can make managing cash flow a challenge.

  • Regulatory compliance:

Construction businesses must adhere to a host of regulations and standards, making bookkeeping even more complex.

Construction Bookkeeping Services: The Solution to Your Pain Points

If these challenges sound all too familiar, don't worry - CCA is here to help. Our dedicated services are tailored to address the unique needs of construction businesses.

Whether you're struggling with accounts receivable or payable, job costing, or WIP analysis, our expert team is equipped to handle it. We offer comprehensive services, including:

In Conclusion

Construction bookkeeping is a critical aspect of managing a successful construction business. It provides you with the financial insights needed to make informed decisions and run your operations effectively.

At CCA, we understand the challenges that come with construction bookkeeping, and we're here to help. Our comprehensive construction bookkeeping services are designed to tackle your biggest pain points, giving you more time to focus on what you do best: building amazing structures.

Ready to transform your construction bookkeeping? Contact us today to learn how CCA can take your business to the next level.

46 views0 comments


bottom of page