The construction industry is challenging. Contractors must work on many tasks at once or switch between them quickly.
In the early stages of a construction firm, it is okay for an owner to handle the company’s accounting and books, but as the company grows, it is simple to forget this area.
All business owners need to be aware of the inflows and outflows of cash for it to remain afloat. Maintaining accurate records of your books is one simple method to keep track of this.
You may be considering hiring a specialist to handle your bookkeeping, given the volume of work you now have to do.
However, if you do, hire a bookkeeper specializing in construction companies’ bookkeeping to handle your records effectively.
The following article will go through the basics of construction bookkeeping and how it helps contractors manage expenses.
What Is a Virtual Bookkeeper?
Hiring a virtual accounting service is a relatively new alternative to adding a bookkeeper to your payroll.
Virtual professional bookkeeping is not some sort of software to take care of your cash flow analysis, bookkeeping, and accounting. Instead, virtual bookkeepers are real people who do their work remotely. This implies that you do not need to hire an internal bookkeeper, which would increase your company’s salary and personnel.
You may get the same knowledge and assistance from a virtual bookkeeper while avoiding employment-related fees, such as benefits, training expenses, and more.
Why Do Construction Companies Need Specialized Bookkeepers?
The organized recording of a business’s financial activity is known as bookkeeping. However, construction bookkeeping is specially designed for this sector. Its principal objective is to allow building businesses to efficiently manage and record their incoming cash and outgoing costs. Nevertheless, you’re probably wondering what sets construction bookkeeping apart from other industries.
Construction bookkeeping is more complicated than standard bookkeeping because contractors frequently work on various unique projects with several specifications and pricing. A retail store’s operations tend to be consistent day to day. Its operating costs are similar and predictable throughout time. Contrarily, building activity deals with customized projects and follows a beginning-middle-end cycle.
Each construction project involves many direct and indirect costs, making it challenging to document everything without effective bookkeeping.
Benefits of Construction Bookkeeping and Accounting Services
Taking Care of the Budget of the Construction Business
An adequate budget is vital for a construction firm to determine its needs, deal with unforeseen occurrences, and, most crucially, earn money. When you update your records, you develop a more exact budget.
Maintaining accurate records of the business’s revenue and outlays will allow you to determine which services generate more revenue and which do not. By hiring bookkeeping services for construction, you will know which construction services to invest more money in.
Estimate the Bid Prices
Every contractor knows that a solid understanding of the expenses associated with any task is essential to producing winning bids and landing contracts. These costs cover labor, supplies, and even the time required to finish a job.
You can quickly consult your records and get a precise estimate of the cost of a project if you have a construction accountant making sure that your books are correct and updated.
Additionally, this guarantees that your bid is lucrative and appropriate.
Elaborate Bookkeeping Systems
When you hire bookkeeping services, your accountant will help you select and implement the best bookkeeping system for your construction firm.
One of the best construction bookkeeping tips is to use construction accounting software if you don’t already have one. They are essential for your construction business because you will avoid spending most of your working hours in an office.
Even if you move from site to site, mobile construction bookkeeping software gives you access to your information wherever you are.
You will require capital from new investors as your construction company expands and upscales. Financial statements are crucial for investors to understand your company’s financial situation and be persuaded to invest in your construction business.
All financial records will be accurate and up to date if you have a construction bookkeeper. They can also help you create the financial statements that your investors will need.
The truth is that all businesses must pay taxes and you want to avoid issues with the IRS caused by inaccurate financial reporting.
When you hire accounting and financial management services for your construction company, you can file the proper tax returns because they will be fully aware of your tax obligations.
Additionally, you can consult your records if the legal requirements for the construction industry change. In summary, if you hire a capable construction bookkeeper, you can rest easy knowing that your tax requirements will be met.
Many construction companies calculate their profit using a simple equation, but this is a flawed method. According to it, you could have gained money, but it ignores the expenses that weren’t directly related to the project. Construction businesses must track all expenses if they want to monitor profitability. In the construction industry, there are two categories of expenses:
The building of a project is closely related to direct expenses and job costing. Some examples are materials, labor costs, subcontractors, and job-specific equipment.
A building project’s indirect expenses are more difficult to see first-hand. They exclude construction job costs that are not directly tied to a specific task. You can determine your real profitability after your take into account these costs. However, it will be much easier after hiring accounting services.
Getting paid may be just as challenging, if not more so, than doing the job! Billing and invoicing are time-consuming, labor-intensive activities. Clear, accurate, and timely invoices are required. They must be connected to your construction accounting program as well. In order to hold consumers accountable, follow-up is crucial, and late payment penalties must be put in place.
We all know that the construction industry requires more work than others, as you must manage several construction projects simultaneously. Some other tasks include job costing, going to the construction and building site, etc. However, your expenses can get taken care of with construction bookkeeping services. We already went through all the construction bookkeeping benefits you’ll get after hiring a virtual accountant. Now, all you have to do is decide to do it!