Essential Bookkeeping Tips for General Contractors: Tools, Software, and Best Practices

Payroll also often includes a variety of bonuses, benefits, and other incentives, such as overtime pay or extra pay for hazardous working conditions. You can go to a bank or credit union to set up a company checking account that suits the needs of your firm.

Understanding Financial Statements

• One of the most significant challenges in construction is dealing with fluctuating material and labor costs.
• Syncing with CRM systems like Salesforce helps maintain accurate client billing records.
• But say the bookkeeper actually wires the rent payment for January on January 1st, and then wires the February rent on Jan 30th, to make sure it is in on time since Jan 31st and Feb 1st fall on a weekend.
• Without consistent financial reports, it’s challenging to understand project profitability and make informed decisions.

An effective change order management system is your first line of defense against this. Your change order system should track a potential change from the moment the issue is identified to the end (whether a change order was actually issued for the work or not). A year, or $150,000, we have a record of uncovering massive tax reduction strategies for every size and type of contracting business. To elaborate further, the following are industry-specific How Construction Bookkeeping Services Can Streamline Your Projects factors that make it imperative to have good construction bookkeeping.

• Essentially, this ASU improves disclosure requirements, prompting more useful information out of financial statements.
• We specialize in reducing taxes and perfecting financials for builders, contractors, and construction businesses, ensuring scalability and profitability.
• While manual bookkeeping methods are still viable, accounting software offers numerous advantages that can save time, reduce errors, and enhance overall efficiency.
• An accountant will help you make sense of the numbers, manage your books, generate reports, estimate your quarterly tax payments, maintain a healthy cash flow, and protect narrow profit margins.
• While it’s possible to manage your construction accounting on your own, owning a construction company comes with many complexities that may lead to you making costly accounting errors.
• Fortunately, there are tools available for construction firms that can simplify life and radically improve business processes.
• Overbilling and underbilling can significantly affect job costing in a construction business.

Change Order Management

Bookkeeping for construction businesses is different because of the nature of work. Unlike a manufacturing unit or a service business like a tow truck, each contract has unique requirements to fulfill. Because construction is project-based, you need a way to see how well individual projects are performing at a granular level, instead of trying to get a grip on your company’s financials from five miles above.

Tools and Best Practices for Bookkeeping

To ensure job costing is accurate, businesses must monitor and track their billing process closely. https://www.merchantcircle.com/blogs/raheemhanan-deltona-fl/2024/12/How-Construction-Bookkeeping-Services-Can-Streamline-Your-Projects/2874359 Under regular business accounting circumstances, revenue recognition is simple because they sell a product or service and collect a fixed price right away. However, the nature of construction companies makes how these businesses recognize revenue more complicated. Consistent updates in the bookkeeping system prevent data backlogs and inaccuracies. It’s essential to reconcile bank statements monthly using software tools to ensure all transactions are accurately recorded. The better you’re able to integrate all the elements that affect your profitability, the better you’ll become at project management, estimating future jobs, and controlling costs on and off the job site.

• Ideally, each of your financial accounting processes should work together seamlessly as a part of a larger system.
• I invest in regular training sessions to keep my team updated on the latest accounting tools and methods.
• The Davis-Bacon Act (DBA) is a United States law that requires employers to pay prevailing wages—the regional minimum pay requirement—on public works projects for laborers and mechanics.
• With manufacturers or service providers, a single rate persists across a production unit or a serviceable item.
• Chris combines his experience in tech and construction to build products that actually help SMB contractors improve and streamline their business operations.
• We Pick up our phones, work pro-actively, and exclusively work with businesses like yours.

Timely Invoicing

By carefully evaluating and selecting the right bookkeeping service provider, you can benefit from expert financial management while focusing your efforts on growing and managing your general contracting business. An accountant in construction typically ensures that the organization’s financial statements, taxes, and other documents are accurate and up-to-date. They might also work to develop budgets, provide cost analysis for current and future projects, and create and manage accounts payable and receivable. Each construction accounting method provides valuable insight into a project’s financial impact that helps ensure projects stay on track, on budget, and succeed. When choosing the right accounting method, you should consider your business’s unique needs and objectives. Even better, clients are more likely to trust businesses that use construction accounting software over manual methods because accounting software provides a safe, convenient way for them to pay online.

Accounts Receivable and Payable Management

She’s passionate about helping people make sense of complicated tax and accounting topics. Her work has appeared in Business Insider, Forbes, and The New York Times, and on LendingTree, Credit Karma, and Discover, among others. Construction companies often face complex tax regulations, especially when operating across multiple jurisdictions. We Pick up our phones, work pro-actively, and exclusively work with businesses like yours. Also, one must understand that the construction industry is particularly sensitive to swings in the economy and political atmosphere.

While it’s possible to manage your construction accounting on your own, owning a construction company comes with many complexities that may lead to you making costly accounting errors. Many construction companies use a “completion percentage” approach, meaning they calculate estimated taxes based on quarterly income and expense reports. Regular businesses typically offer 1-5 different types of products or services, whereas construction businesses offer a wide range of services. This may include service work, design services, consulting, engineering, sourcing materials, and more.