Make Better Business Decisions with Construction Bookkeeping
Bookkeeping and accounting for construction carries unique challenges. The experts at On Track Business Management specialize in both the training and performance of construction bookkeeping concepts, including job costing, over/under billings, subcontract control and construction project administration.
Construction accounting training is a vital part of construction company leadership, and On Track has made it easy for leaders and bookkeepers to learn every aspect of accounting for construction projects. On Track experts can assist companies with the review and analysis of job cost and profitability reports, a vital accounting task for construction companies looking to stay profitable and scale upward.
Proper accounting for Job Costs (or Cost of Goods Sold) allows owners and project managers to properly evaluate actual costs against budgeted costs during and at the conclusion of the job. Too often, expenses such as General Liability or Worker Compensation insurance are posted to Overhead, when they should be posted as Direct Expenses or Job Costs. There are many direct benefits to accurate construction job cost accounting, including:
- Cash Flow Analysis during the job. This ensures you won’t run out of money before the job is over.
- Accurate Gross Profit. Gross profit is income less Job Costs. Construction company owners need to know what their gross margin should be in order to cover all overhead expenses.
- Future Estimates. How should future jobs be estimated to cover expenses as well as produce desired gross profit?
Over / Under Billing and Work In Progress / Percent Complete
This is one of the most important concepts in construction cost accounting. Some construction projects are long-term in nature, with invoicing and costs spread out over a lengthy period of time. Matching income and expenses to the same period of time will produce an accurate Income Statement (Profit & Loss) as well as reduce the risk of “profit fade,” or cash flow shortfalls (the recognition of profit too early, or late, in the job cycle). In addition to wreaking havoc on your finances, these problems can also be a major red flag for sureties and lenders. Correct construction work in progress accounting opens the door to reliable profit and better future estimates.
Cost to Complete
Estimating the total cost to complete a project is an important tool for construction companies. On Track Construction Accounting can help company owners and project managers estimate the total costs to complete the project.
On Track has the knowledge, capacity, and team to handle large and small projects. Large projects requiring paperwork such as Conditional and Unconditional Lien Waivers and Releases can be overwhelming. On Track can smoothly and efficiently take care of all of the paperwork required for your jobs from start to finish, including:
- Change Orders
- Purchase Orders
- Progress Billings
- Conditional and Unconditional Lien Waivers and Releases
Accounting for construction contracts and subcontracts can get complicated. Because On Track specializes in project administration, we can efficiently track subcontractor costs during the job (ensuring you do not overpay), insurance certificates (ensuring you are in compliance and covered by your General Liability Insurance, Worker’s Compensation, and other Insurances), and producing / organizing all of the necessary paperwork so you get paid on time by your customer.
The Benefits of Accurate Bookkeeping and Accounting for Construction
Understand Your Contract Specific Reports
Most contractors know they need to buy construction software for job costing purposes but rarely view and analyze the reports it can produce. Job cost and profitability reports are highly valuable in analyzing the accuracy of the estimate and the success of the job. On Track helps construction company owners learn what reports are available to them, when to view them, and how to use them to make profitable business decisions.
Understand your Financial Reports
Many business owners do not review important financial reports such as the Profit & Loss (also known as the Income Statement), and the Balance Sheet because they do not know what the data is telling them or what to do with it. On Track experts can help owners analyze these statements and produce a whole picture of their company’s finances based on the facts.
Learn how construction project accounting enables your business to prosper with every job. Schedule your training today by filling out our online form or giving us a call at (530) 478-9234.