Accounting for Construction Companies: Audit, Tax, & Advisory Services

At Apparatus Contracting Services, we know the path to becoming a contractor doesn’t take a pit stop at Finance 101. You built your construction company with the tools and skills you learned on the jobsite. Our mission is to provide builders, developers, GCs, and specialty contractors the precision accounting services they need to aggressively grow their businesses and their bottom lines. Regular forecasting allows construction companies to anticipate financial needs and plan for large expenses.

Construction Accounting Best Practices

Accrual accounting records revenue and expenses when they are incurred, regardless of cash flow, while cash basis accounting only records transactions when money changes hands. The construction industry often recognizes revenue based on a percentage of project completion rather than simple sales. This approach requires monitoring of contract values, project phases, and completion percentages to determine accurate revenue recognition. This section offers recommendations for software that provides essential features without overwhelming complexity, helping you manage your business effectively. These are formal documents that alter the scope of work, budgets, or timelines. Properly managing change orders ensures that all changes are documented, approved, and reflected in the project’s budget and timeline, preventing scope creep and cost overruns.

• Progress billing is one of the most widely used methods in construction, particularly for long-term projects.
• When it’s time to unwind, you’ll find him at the movies or casting his line out for a relaxing fishing session.
• This is primarily driven by the volatile prices of labor and raw materials, which can significantly change throughout the project’s extended duration.
• This practice is essential for maintaining a steady flow of funds throughout the project.
• Effective allocation of these costs helps ensure that each project bears its fair share of overhead expenses, contributing to a more accurate assessment of project profitability.
• Setting rates or establishing caps for equipment inventory can help monitor cost accumulation and keep projects on budget.

Percentage of Completion Method

It means we’re all about being adaptable, agile and highly dependable.We don’t play favorites with software when it comes to providing top-notch accounting and bookkeeping services. We seamlessly adapt to your preferred software, giving you the strategic advantage, the nimbleness you need and the reliability you can count on. Boost your cash flow by navigating the complex tax credit claims process with our R&D Tax Credits, Federal and State Hiring Credit Services, and more. Business owners should incorporate both the business’ needs and personal financial goals into plans for future management, successor selection, and shaping their legacy.

Ready to streamline construction operations?

• Unlike generic accounting tools, construction accounting software is purpose-built to manage the industry’s challenges—where cash flow is dynamic, project timelines fluctuate, and each job presents distinct requirements.
• Job cost sheets are a major part of construction accounting, as accountants use them as a financial guide.
• Leverage the power of technology solutions to transform your company into a data-driven organization with our Enterprise System Consulting, IT Development & Integration, IT  Assessment & Planning, and more.
• They are also designed to integrate seamlessly with financial software, ensuring that all project-related financial data is synchronized, accurate, and easily accessible for informed decision-making.

In construction accounting, managing indirect costs is crucial because they can significantly impact the profitability of a project. Effective allocation of these costs helps ensure that each project bears its fair share of overhead expenses, contributing to a more accurate assessment of project profitability. By understanding these construction accounting basics and implementing best practices, you can better manage your construction business’s finances, ensure compliance, and drive profitability. Remember, effective construction accounting is not just about number-crunching and financial statements–it’s a powerful tool for informed decision-making and business growth.

It’s important to accurately document the financial impact of each change on the overall project. Remember that most construction contracts include retainage–a portion of the payment that is usually withheld till the entire project is complete. This means that a contractor’s profit margin can be held back long after their portion of the work has been completed.

Construction accounting is the process of managing financial transactions specifically for the construction industry, which operates differently from other fields due to the nature of its projects. In construction, costs are incurred at varying stages, and revenues are realized only as project milestones are reached, making cash flow management and financial tracking challenging. The Percentage of Completion Method recognizes revenue and expenses in proportion to the work completed during a reporting period. This method is particularly useful for long-term construction projects spanning multiple accounting periods, as it provides a more accurate representation of the project’s financial performance over time. Job costing is a method used to track costs per project, ensuring each job construction bookkeeping services remains profitable. With tools like Planyard, companies can simplify job costing, manage budgets, and track expenses, enhancing project profitability.

• After you provide some basic financial documents, I’ll assess your company’s financial health and create a blueprint with recommendations and next steps.
• Beyond the office, she’s a true crime enthusiast who loves traveling and outdoor adventures.
• If they aren’t qualified professionals, you’re leaving your critical business finances vulnerable to unintentional errors or issues.
• This provides an incentive for the contractor to finish the project to the client’s satisfaction and ensures funds are available to address any issues or deficiencies that arise during the final stages of the project.
• Rippling helps increase savings, automate busy work, and make better decisions by managing payroll, HR, IT, and spend in one place.

Data retention

You need a way to easily create and track them in your construction accounting system, so you don’t have to rely on risky handshake agreements. Submitting a formalized change order is much more reliable, both from a communications and financial standpoint. Consider structuring contracts to include milestone payments or deposits at project initiation to cover early expenses.