Top Reasons Why Construction Bookkeeping Matters & Best Practices
Updated: Oct 20, 2022
Construction bookkeeping is one of the most intricate aspects of running a construction company. Unlike other industries, construction businesses do not have a fixed location. Instead, this industry depends on various suppliers and subcontractors to complete their work.
It is important to maintain accurate records. Taxes and profits are calculated and paid precisely. The secret to success is accurate construction bookkeeping.
This blog post will explain why construction bookkeeping is important. And suggest some best practices you can apply to your bookkeeping.
Top Reasons Why Construction Bookkeeping Matters:
The top three distinct challenges that only the construction industry has. These 3 problems show why contractors need construction bookkeeping
1. Construction Industry Is Project-oriented
Construction firms frequently have many projects in different cities. It costs money to move people and equipment between locations. Contractors, so, have the possibility of incurring more costs or suffering financial loss. That’s why it is needed to have an accurate book to get your projects run well.
2. Construction Industry Has Many Costs
There are many kinds of costs:
Equipment rental (such as scaffolding, ladders, and power tools)
Wages for employees and subcontractors.
Materials costs (for example, paint or building materials like lumber).
Keeping track of all costs within a project is essential. By doing this, contractors will be able to check costs and decide on future projects more efficiently.
So, make sure correct bookkeeping to avoid time and money waste
3. Construction Industry Is Outdoor-based
When it comes to fieldwork, it relates to unpredictable weather. Regulations may be also an impact on project finalization, which is another challenge for construction. Records can easily be forgotten, lost, or not entered into the books at the proper time when there are so many moving parts. Thus, to successfully run their business, contractors want to ensure accurate construction bookkeeping.
Construction Bookkeeping Best Practices
Here are a few bookkeeping hints to help you organize your accounts better and keep them as clear as you can.
1. Keep Journals Of The Company's Daily Transactions and Documents.
The first step is to keep track of your receivables. Recording each customer's payment, so you never miss who owes you cash.
Second, keep a record of all project-related expenses and bills. Saving all your receipts and entering them into your books each day.
Third, make sure all your records and documentation are up to date for easy access and informed decisions making.
This can be done either on your personal book or a cloud-based book thanks to advanced technology.
2. Have Your Data Backup
Store copies of all daily transaction journals. You can never predict when an error might occur, and then all the transaction journals are suddenly lost. Online documents can be screenshotted and saved, as well as paper invoices and receipts that can be filed or scanned.
Always keep a source handy so you can refer back to it. Calendars can be used to keep track of the billing and invoicing cycles to ensure that neither is forgotten.
3. Open Different Checking Accounts
A simple way to keep track of costs and revenue is to maintain separate checking accounts. You should take into account at least three accounts based on each one's individual goal. The first account ought to be designated for deposits, the second ought to be reserved solely for payroll, and the third ought to be designated for cash. This allows you to always be aware of how much cash you have on hand and stops you from messing everything up.
4. Best Accounting Software For Construction
Construction accounting software can deal with modules. They are job-specific costs and revenues, payroll management, billings, and general accounting procurement.
For some business owners who don't know how to do construction accounting, it is ideal to start with these systems’ support. Some best contractor accounting software such as Quickbook, Sage 100C, or Job Power, assist contractors with a variety of industry-specific tasks, including monitoring wages, performing payroll duties, and keeping track of accounts payable and receivable that you should take into account to keep a good book.
5. Outsource Construction Bookkeeping Services
Should you outsource construction bookkeeping services?
The fact that a contractor has to wear many hats at the same time can make construction bookkeeping difficult. Outsourcing to third parties who are familiar with the laws and regulations may be the best option for you to get your business off to a successful start.
Construction Cost Accounting provides private and expert bookkeeping services to contractors. With a professional team of bookkeepers with years of experience in Quickbooks and Sage 100C, we are here to cover everything you could possibly need for your business, including up-to-date books, account payables, and receivables, or even if you want to set up a chart of account for your construction company.