6 Bookkeeping Tips for Construction Companies

Construction companies often face complex tax regulations, especially when operating across multiple jurisdictions. Failing to comply with these requirements can result in audits and penalties. You can stuff your receipts into one of our Magic Envelopes (prepaid postage within the US). Use our receipt tracker + receipt scanner app (iPhone, iPad and Android) to snap a picture while on the go. Shoeboxed allows users to digitize these receipts by taking photos with their mobile devices and using Shoeboxed’s app to upload receipt data into a designated account. These receipts will show where your money is going and will be your lifeline if you are ever audited.

Get the Construction Financial Help You Need from New Lyfe Accounting

• You need to have accurate bookkeeping not just for the sake of taxes and potential audits, but to monitor your cash flow and ensure you’re being compliant and profitable.
• Withholding retainers can further delay payment, which is why it’s important to accurately track costs and have funds available for shorter pay periods.
• Automating these processes simplifies workflows, saves time, and ensures data accuracy.
• Allocating a portion of your income specifically for taxes helps avoid unexpected liabilities during tax season.
• If it’s too clunky or complicated, you might want to choose something else.
• Ideally, a construction software that automates some – or all – of your bookkeeping would make running your business a lot easier.

In most industries, commissioned contractors get paid upon delivery of a product or service. Construction bookkeeping, while challenging, is an essential part of running a construction company. Here are some things to keep in mind when bookkeeping for construction firms. Where tracking results on a single project is tricky, what’s even more challenging is tracking results across multiple jobs running simultaneously.

Contract Retainage

Its purpose is to enable construction companies to have a better understanding of their financial situation through tracking and recording both expenses and incoming payments. Accurate job cost accounting also allows you to analyze cash flow to ensure your project has enough funds to keep production moving forward. It lets you see all overhead expenses so you can accurately calculate profit. Based on the project’s necessary job types and activities, https://digitaledge.org/the-role-of-construction-bookkeeping-in-improving-business-efficiency/ you’ll be paying varying rates. It’s important to pay attention to job costing, as it can allow project managers and supervisors to accurately budget for future projects and determine how to improve estimates.

How to choose the right construction bookkeeping software

First, break down the project into phases, and then list all the tasks needed to complete each phase. You probably already know that you should be keeping all your business receipts. You also need to keep in mind that the construction industry is highly susceptible to political and economic fluctuations.

Percentage of Completion Accounting

This allows you to calculate the true cost of each project and identify areas where you can improve profitability. If you’re not the bookkeeping type, you may find bookkeeping tasks mundane and frustrating, but getting it right is extremely important. If you don’t intend to hire a professional, follow these best practices for construction bookkeeping to keep your financial records updated. The ASC 606 applies to construction companies because of the nature of their revenue. There are other aspects of construction accounting that make it unique from general accounting, as well. Progress billing allows businesses to construction bookkeeping bill clients based on project completion stages, ensuring steady cash flow during long projects.

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