WHAT IS CONSTRUCTION BOOKKEEPING AND WHY IS IT IMPORTANT
Construction bookkeeping is a form of bookkeeping exclusive to the construction industry. The aim is to enable construction companies to better understand their financial situation, to track and record the costs and payments received. Construction bookkeeping, while difficult, is an important part of running a construction business.
Like it or not, you’ll need to find a way to manage your business’s bookkeeping if you want to:
- Accurately track expenses and income
- Protect project budgets
- Manage projects efficiently
- Find ways to cut costs
Why construction bookkeeping matters
Construction can be synonymous to a complex machine with many moving parts. This can make it difficult to track revenue and costs for an individual project, let alone several. Here are six aspects of the industry that make effective construction bookkeeping important.
Different custom projects that need to be attended to
The decentralized nature of the industry makes construction bookkeeping unique. No two projects are the same. The cost only costs the transfer of people and equipment to other locations. If you are operating through government lines, you may need to consider paying additional taxes.The more projects your business manages and the more workers you hire, the more important it is to have your accounts in order.
Direct and indirect costs
Direct costs are those associated with a given project. They include labor, equipment, materials, etc. Indirect costs are those that are essential to the functioning of your business in all projects. Examples include equipment, insurance, transportation, and software repairs. You need to record direct and indirect costs if you want to control and spend effectively.
Contract value and duration
The high cost and duration of construction projects make payment planning and invoicing unique. In most industries, demanded suppliers are paid upon delivery of a product or service. However, construction projects can take months or even years. This makes accurate bookkeeping crucial.
Project costs will vary based on when and season the work will be performed, as well as the cost of materials and the workload of workers and equipment. You should also be aware that the construction industry is very sensitive to political and economic fluctuations. Often, cases beyond your control will affect the cost of materials, equipment, and labor.
Exclusive salary considerations
Another element in which bookkeeping is needed in construction is the monitoring of the calculation of wages. Unfortunately, it’s not as simple as setting the worker’s compensation and paying the same costs per project. Construction companies often have to pay their workers what is called a regular wage. The current wage is the standard hourly rate for a worker in a particular state or location determined by regulatory agencies and the State Department of Labor in each state. Union fees, travel allowances, and taxes can also affect how much you have to pay workers. Tax Prep Buddies is very experienced in this area feel free to contact at :407-553-2449.