A Guide to Construction Bookkeeping

A refined understanding of WIP, job costing, IRS requirements, and more is required. Construction bookkeeping is a form of bookkeeping unique to the construction industry. Its purpose is to enable construction companies to have a better understanding of their financial situation through tracking and recording both expenses and incoming payments. They are financial experts with a comprehensive understanding of the unique challenges and nuances faced by the construction industry. From job costing and progress billing to lien waivers and change orders, they handle the financial intricacies so you can focus on building your projects and your business. Without consistent financial reports, it’s challenging to understand project profitability and make informed decisions.

Creating Financial Statements

Additionally, cloud-based solutions offer automated workflows that simplify many repetitive tasks involved in construction management, such as scheduling, budgeting, and documentation. By automating these processes, you can reduce the risk of errors and minimize duplication of effort, saving you time and money in the long run. It’s absolutely essential that construction companies have an intimate understanding of their local and state laws and requirements. Do your due diligence as a business owner and take the time to understand these requirements verbatim.

Solutions

Another key benefit of cloud-based solutions is that they provide seamless mobile access for on-site teams. This enables them to access project information and communicate with other team members from anywhere. This can improve collaboration and ensure everyone is on the same page, regardless of location. It’ll also give you a good idea of what you’ll be making per project, which can free up cash flow and allow you to leverage the cash in new projects, new rentals, etc. Account reconciliation is about financial accuracy and ensuring compliance with legal requirements and reporting standards.

Installment method

Auditors should review the financial records, policies, and procedures to identify any weaknesses in the system of internal controls. Bridgit Bench is a workforce planning platform built to help construction professionals, including accountants. Alternatively, you can take advantage of a dedicated bookkeeping software solution to manage your bookkeeping more easily.

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Additionally, while a non-certified accountant could handle some of your bookkeeping needs, you should focus construction bookkeeping on certified and licensed accountants to stay on the safe side. The simplest way to account for retainage is to include two sets of information on your invoices. As we mentioned earlier, contract retainage can account for 5 to 10 percent of your contract value. This helps you get a better idea of how much money is coming in and going out of your business every month.

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• Manual job costing can be very time-intensive, especially when it comes to complex projects.
• Once the project is completed all accumulated accrued revenue and expenses will be recognized on the income statement.
• One of the most significant challenges in construction is dealing with fluctuating material and labor costs.
• Construction companies have specific tax obligations that they need to comply with.
• Union rates, travel pay, and taxes can also impact how much you’ll need to pay your workers.

In summary, financial reporting and analysis are critical for construction companies to understand their financial position and make informed decisions. By creating accurate financial statements, managing cash flow effectively, and budgeting and forecasting, construction companies can achieve financial success and grow their business. Tools like Planyard simplify the process by automating routine tasks, providing real-time financial visibility, and integrating with existing accounting software.

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• It lists thousands of licensed CPAs who can help with all your accounting needs.
• Tracking these costs separately helps bookkeepers identify discrepancies early and maintain control over the budget.
• To simplify this process, many construction companies use payroll software that can automatically calculate wages and taxes.
• Change orders often arise during construction, requiring real-time adjustments to project budgets.
• Accurate job cost accounting also allows you to analyze cash flow to ensure your project has enough funds to keep production moving forward.
• Lastly, as Hubstaff records workers’ arrival and departure times, there is no need for them to note down this information manually.

The money that a client holds until the project has been completed satisfactorily is generally put into an asset account called a Accounts Receivable Retainage or Retainage Dues account. Construction bookkeeping is a crucial part of running a construction business. Make sure to take advantage of these free trials when you’re shopping for your next bookkeeping solution.