Construction accounting is very similar to any other type of business in that it has to show records of your earnings, expenses and returns. However, this is not all that construction accounting involves.
As you may already know, when you own a construction business, you will be using accounting software to help you manage all of your business operations. Of course, you will also be managing your employees and any subcontractors you have working for you.
The three most important sections of a construction accounting system are the Maintenance, Construction Equipment and Property, and Property and Casualty insurance. These are often called the three categories of accountancy. They are always taken together when you get a construction accounting system.
When you own a construction business, you’ll need to be very careful with your accounts. Since this is your livelihood, there is no reason for you to skip out on accounting, but there are some rules that must be followed.
A good rule of thumb is to first make sure that all of your financial records are current. You do not want to take a deduction from a capital expense just because the year or quarter you did not have enough documentation on the contract. It is better to have this information in hand before you start to deduct anything.
This will include any contracts that involve construction property insurance or property damage insurance. You will need to also make sure that your employees’ income tax returns are up to date and current. You should also keep records of your inventory so that you can determine if the number of hours you put into construction work actually equates to what you actually sell on the sales side of your business.
Keeping records of your time spent on any project can be as simple as keeping a list of your estimated hours and dividing it up into different projects. This way, you will be able to check your time balance on a daily basis and not have to guess at what days you are spending a lot of time on different projects.
Make sure that your payroll systems are running properly. You will need to have accurate records of the hours you have worked and who you have worked for in the past.
Once you have all of your records set up, then you can start to look at what your construction equipment is costing you on a regular basis. By doing this, you will be able to see which items are costing you the most money and therefore if you can cut back on some of these expenses.
When it comes to new equipment, make sure that it is something that can last for a few years or at least close to the same amount of time. While you might be tempted to buy a new machine, you should always remember that this will have a negative impact on your records, which is why it is very important to have a good record on the equipment you buy.
Will you be hiring someone to help you out with the books? You should try to hire someone that is highly experienced and knows all the latest accounting software programs so that you do not run into any problems down the road.
Construction accounting is not as complicated as most people make it out to be. There are many people that are working on construction accounts, and the process does not have to be complicated.