Construction bookkeeping: everything you need to know

Moreover, long-term contracts are a common feature, necessitating meticulous financial planning and monitoring over extended durations. Accurate cost tracking is essential for job costing and profitability analysis. Your business, with its expansive operations, needs strategic guidance on how to manage accounts receivable and indirect costs, how to read income statements, and how to control overhead expenses. What’s more, our team will help you put together construction projections and make sure that your bank accounts are always in sync with your business goals. The percentage completion vs completed contract is often used by construction companies because they typically work on long-term large projects in which income and expenses are often deferred.

Construction Software we Support

• We recognize that smaller construction companies need more in-depth explanations and personalized support.
• By comparing estimated completion percentages with actual costs and billings, WIP reports provide critical insights that help managers make informed decisions and maintain project profitability.
• Remember that your P&L statement may show significant variations from month to month due to the timing of project completions and progress billings.
• Our Tampa-based team, which includes a CFO, Controller, Staff Accountant, and Bookkeeper, offers exceptional client care and has the knowledge you need to manage your business.
• Additionally, the software also provides tools for creating and tracking subcontract status, purchase orders, and budget comparisons.

The format provides a clear snapshot of the project’s financial status and helps both you and your client track progress effectively. You’ll typically submit these bills monthly, accompanied by a schedule of values that breaks down the contract into manageable components for easier tracking and verification. In construction accounting, you’ll encounter several specialized accounting and bookkeeping for construction companies billing methods that differ significantly from standard invoice practices. Managing retainage effectively requires you to maintain clear documentation of all retained amounts, including when they were withheld and when they’re due for release. You’ll also need to consider retainage when preparing cash flow projections and making decisions about project financing.

Best for Project Drawing Integration

Think of any other business, balance sheet such as a chain of designer cupcake shops or a pneumatic valve manufacturer. There, managers might treat each store, plant, product line or the entire business as a “profit center.” For most industries, these are stable and predictable. Learn more about what features to look for in a construction ERP and compare top systems including, Viewpoint Vista, Jonas Enterprise, Acumatica, Foundation and Sage Intacct.

Construction Accounting 101: A Basic Guide for Contractors

Also, it’s often used to determine the financial position of your company for lending and credit purposes. To choose wisely, you need to do some research to assess which one can meet your business’s meets and demands before paying for accounting software. It would not cost you too much but it’s essential to keep your business organized and you can spend more time on revenue-yielding activities. While cash-basis accounting has several advantages, it’s not for every construction business. In fact, while many U.S. small businesses prefer cash accounting for its simplicity and flexibility, only some contractors qualify.

• Because customers’ payments arrive at various times, unpredictable cash flows are expected.
• Sage 300 is as comprehensive as it gets with prebuild reports; there are more than 1,400 to choose from.
• For example, a contractor might “code” an invoice to Job 140 (Lake Ave. Remodel), Cost Code 100 (Foundation), Cost Class “MAT” (Materials).
• For growing construction companies generating $2M–$10M+ in annual revenue, Gold delivers essential accounting strength and precision.
• We also like that Acumatica integrates easily with other systems like Procore, ProEst, and eSignature apps like DocuSign.
• You’ll also need to account for contract retainers, usually 5-10 percent of the contract amount.

Length of contract

Regular completeness checks ensure no missing documents, while secure storage protects sensitive financial information. Successful growth and succession planning relies heavily on proper documentation management – another critical aspect of construction finance. Though WIP Record Keeping for Small Business reporting tracks projects during execution, equal attention must be paid to the final stage – project closeout. Remember that your tax strategy needs to align with your overall business goals. For example, if you’re planning significant equipment purchases or expansion into new territories, these decisions should factor into your tax planning.

• Develop a clear system for categorizing expenses and train your team to use it consistently.
• Our  accounting for construction company service ensures that every detail, from income to outflow, is transparent and manageable.
• Construction accounting is a highly specialized branch of accounting tailored to address the complexities of the construction industry.
• Job cost reports also detect changes in subcontractor demands, helping avoid excessive costs and ensuring better financial control.
• Plus, it’s 100% cloud-based which means your team can access it from anywhere and you don’t have do deal with the pains of on-prem software.
• If your business manages several projects simultaneously, you must ensure you have enough capital to hold up your end of the deal.

With accurate construction accounting, companies can better manage their liquidity and prepare for cash shortages. Effective financial management is crucial in supporting business growth and leadership transitions in construction companies. Here’s how professional bookkeeping services can help plan for these important milestones. Another essential report is the profit and loss statement, which tracks overall company performance and individual project profitability. You can analyze gross and net profit margins by separating direct costs from indirect expenses. This report helps identify the most profitable projects and where cost controls might be needed.