Keeping comprehensive records in the construction industry is a challenging task as data for multiple projects, jobs and/or builds need to be tracked at the same time. Retentions need to be tracked and invoiced by set dates. On top of that, relevant trade associations such as QBCC may request the trade entity’s financial data to make sure the trading entity complies with QBCC’s minimum financial requirements.
Consistent record-keeping practices should be established in your construction business. Employees need to be correctly recorded on payroll with correct rates and annual leave/sick leave accruals (where applicable). Expenses should be tracked to a job to establish an accurate gross profit figure per job/project. Bookkeeping tasks need to be completed regularly in order to be able to extract up-to-date reports. If you’re already struggling to keep on top of bookkeeping, contact us today to get assistance.
The two important areas of construction accounting are:
- Job Costing
A well-managed cash flow ensures that your construction projects move according to schedule. Projected cash flow reports will help you establish if you can cover the cost of variations and unexpected expenses.
It is crucial to know if every ongoing job/project is profitable. Once direct costs are assigned to jobs, you’ll be able to determine the gross profit of every job. Overhead expenses can then be equally split to determine the net profit.
What makes accounting in construction different?
Regular businesses use accounting principles that work in a steady market where prices are constant. In contrast, construction businesses may be impacted by seasonal trading, quotes vary per job and the work in progress figure needs to be tracked.
Construction businesses make progress claim payments and most of the time the construction businesses must physically pay for direct and indirect costs before the progress claim can be made.
Job Management Software for Construction businesses
Evidently, being able to track, report and correctly categorise direct costs along with other expenses in your construction business is critical for knowing which projects will result in healthy profits. Job management software also helps the estimator bid on projects and accurately charge for variations.
For accurate job costing reports, your accounting department should receive daily reports from the job site to ensure the data is entered into the accounting software on a frequent and timely basis. This is a time-consuming process as it requires manual entry if you don’t have specific construction management software.
We recommend an integrated job management software that will be easy for site managers and employees to use when completing and submitting progress reports, changing orders, submitting daily costs, and timecards. Job management software is usually accessible via the cloud so any reports entered into the system are automatically saved and can be accessed by other authorised users simultaneously.
If you need help picking the right software, you can read our article comparing software management software. We’ve gathered information that’ll help you streamline processes in your business. If you would like further information on the above or have any questions, don’t hesitate to contact us.