Five Reasons Bookkeeping for Contractors Should Never Be an Afterthought
Bookkeeping services for homebuilders are often not too high on the list of things that need to be taken care of in this line of business. The problem there is that your revenue can take a massive hit from avoidable mistakes.
Even if you manage to avoid that problem, your construction projects may simply not be as efficient as they could be if your numbers were managed well.
Why Do Construction Companies Have Trouble with Bookkeeping?
Whether it’s bookkeeping for general contractors or specialists, the nature of construction companies is where a lot of the difficulty lies. Job costing is often not a straightforward process. Who is taking the time to properly keep track of direct and indirect costs? Are your labor costs being accurately verified?
Investing in construction accounting software would probably help, but admittedly, it may not be feasible to do so. This is especially true since there would need to be on-hand expertise to manage it.
Construction businesses are decentralized operationally, and that means that bookkeeping, which is centralized and requires organized information may be difficult for you.
Here's Why Every Construction Business Should Prioritize Bookkeeping
1. Construction Bookkeeping Mistakes Can Be Costly
Accounting and financial management are essential at some level in any company. That even includes the small one. One missed line item in your job costs or one unnecessary item can mess up your bottom line.
That’s costly enough, but what happens when auditing time comes around and you have to spend even more to try to correct the mistake?
2. Analytics Can Mean More Profitable Decisions in the Construction Industry
One of the most fundamental construction bookkeeping tips is to be analytical. While many construction companies don’t do this, the ones that do find that they are better able to plan financially. Executing that plan also goes incredibly well.
This means better financial records, better financial decisions, and potentially greater revenue.
3. The Decentralized Nature of Things Can Make Tracking Business Expenses, External Influences, and Other Areas Difficult
This was something you saw before. Information and operations are everywhere, which makes construction accounting difficult. A successful construction company needs to be able to account for all financial transactions and other cost centers. Proper accounting addresses this need.
4. The Revenue Recognition Method Can Be Tailored to the Construction Company
Revenue recognition speaks to recording when the business generates revenue and how it does it. This means having a better handle on every construction project, purchase, sale, etc. Any company in the construction industry will benefit tremendously from this from both tracking and auditing perspectives.
5. The Taxation Element of Financial Management Becomes Less of a Pain
Especially when you have a separate business bank account from personal expenses, the lines of taxation are a big concern. Proper bookkeeping means keeping up with taxes and not risking fines or other penalties.
Wrapping Things Up: Consider Virtual Bookkeeping and Accounting Services