If you are running a construction business, it is no surprise that accurate accounting is really the crux of your success. Good accounting helps you manage your money wisely, plan for the future, and adjust to any changes in the industry.
But failing to keep up with the financial management of your construction business can have serious consequences on your bottom line and impact your overall business growth.
That is where hiring a virtual construction assistant to help with bookkeeping and accounting can be a smart investment in your overall profit. Our team at Virtual Construction Assistants has been helping the construction industry find, hire and recruit the best virtual talent for their business needs.
If you are struggling with bookkeeping and accounting for your construction projects, we will walk you through some basic tips to improve your construction accounting, manage your construction trades or business’s finances smoothly, and find the success you are looking for.
Understanding Construction Accounting
Let’s begin with the basics: what is construction accounting, and how does it differ from accounting in other industries?
Construction accounting is a specialized form of accounting that is based on individual projects and not financial data for the entire company.
Unlike regular accounting, which provides a general overview of a company’s financial health, construction accounting focuses on specific project profits like overhead costs, material costs, labor costs and other fixed price expenses that go with construction projects.
Step by Step on How to Do Accounting for Construction Companies
For a beginner construction manager or an early-stage business owner, understanding where to start when it comes to accounting can be the hardest part of navigating the construction industry.
A virtual construction assistant can help manage these tasks for both contractors and you and establish reference points for financial statements moving forward. Here is how to get started:
Step 1: Separating Personal and Business Expenses
First and foremost, separating your personal and business expenses is essential. Mixing the two can create confusion, complicate your tax planning, and make it difficult to determine how your business is doing.
You should make sure to keep accurate records and avoid using personal funds for business expenses whenever possible to ensure all your overhead expenses are separate.
Step 2: Open a Separate Business Account
To better manage your finances and keep your personal and business expenses separate, one of the first things you should do is open a separate bank account specifically for your construction business. This will also ensure you are building your credit and establishing your business finances separately from any personal charges.
Step 3: Choosing the Right Accounting Method
There are two primary revenue recognition methods to choose from: accrual accounting and completed contract revenue recognition.
While contract completion revenue accounting is simpler, accrual accounting provides a more accurate “real-time” picture of your construction project finances.
The right accounting method for your construction business will depend on your company’s size, cash flow needs, and industry regulations. If you are not certain which method is best for your construction business, consult with an accounting expert to make sure you choose the accounting method that positions you to best manage cash flow, anticipate future expenses, and ultimately drive profit.
Step 4: Estimating Job Costing Accurately
In construction, job costing is crucial to understanding how much profit each project brings in, and enabling you to make the best financial decisions. Accurate job costing involves assigning direct and indirect costs to specific projects and comparing them to the overall project revenue.
This process helps construction companies identify the most profitable projects, the cost and find areas of improvement to predict future project costs better.
Tips to Simplify Your Construction Accounting
If you are overwhelmed by managing all your construction costs, you are not alone. Many construction executives have turned to outsourcing their construction accounting and bookkeeping with the help of our services.
Here are a few ways you can simplify your construction accounting and improve your company’s financial data.
Hire a Virtual Construction Assistant
Sometimes, the best way to simplify complex accounting tasks is to let someone else handle them. If your budget allows, consider hiring a virtual construction accountant who specializes in the construction industry. We can help you hire and find a construction expert that deeply understands the unique accounting needs of the construction industry, enabling them to keep your finances in check while you focus on what you do best.
Use of Modern Construction Accounting Software
If you are looking to improve your construction accounting practices, embracing technology can be a game-changer. Modern software solutions can automate data entry, generate detailed reports, and sync with other essential business tools. By investing in cutting-edge accounting software, you can save time, increase accuracy, and make data-driven decisions to improve your construction business’s financial performance.
As a business owner, it is important to keep tabs on your company’s financial status by regularly reviewing essential accounting reports. By tracking your cash flow, balance sheet, and income statement, you will be able to detect any unusual patterns or emerging trends. Consistently monitoring financial reports is crucial to quickly fix any errors and capitalize on business opportunities when they arise.
Find a virtual assistant for your construction projects
We know your time is valuable, and navigating your company’s construction accounting can be time-consuming. That is why we encourage you to partner with our team at VCA. With our help, you can streamline your accounting processes and ensure that everything from job costing to compliance laws is handled with meticulous care and precision.
From the construction site to the board room, do not let the complexities of construction accounting slow down your business’s growth. Reach out to us today, and take the first step towards getting the accounting and bookkeeping support you need for your construction business.