Construction accounting is a unique type of accounting that requires specific financial management tools. Here’s what you need to know.
As the owner of a remodeling or custom building company, you likely bring a huge list of abilities and talents to your daily work life! From the tangible job skills to the energy you expend to manage projects effectively, your work is never done…
Yet, after working with many individual clients, I find that even though you create complex and beautiful results, far too many of you are underpaid.
It does not have to be this way!
I sincerely believe that you can reduce your profit-margin woes when you begin to use an effective accounting-for-construction system designed specifically for your industry. Why? It’s because construction requires specific financial tools unique to the construction field,
My goal is to help business owners like you (and your bookkeeper) use construction accounting and management reporting so you can maximize your profits.
What’s So Different About Accounting for Construction?
You are in a high-risk, service-oriented business. When your job income is fixed based on your Quote, costs can eat away at your profits. For example, think about:
- Variable material prices
- Weather problems
- Labor overruns
This high variability means you need an accounting system that’s unique and distinct from other industries.
Deciding WHAT To Measure and Monitor
The first step to designing a successful construction accounting system is to take the time to think through (on a deep level) how you run your business.
Think about one of your clients. For example, he or she may know they want a new kitchen. But you’ll start by asking questions about the frequency and type of cooking, family and entertaining requirements, and the types of appliances they’re looking for. Then you can design and customize the kitchen that will be best suited for (and delight) your client.
It’s the same story with your accounting system. To create the ideal system for your business, you’ll want to evaluate your own needs, and define and clarify the information you require to run your company more effectively and profitably.
Here are some ideas for questions to ask and answer:
- What is your dream for your company?
- What is your company’s mission?
- What are your financial goals for your company next year? And further into the future?
- What are your money goals for you and your family?
- What information will help you measure your progress toward each of these goals?
- How will you know the right things are happening and the wrong things aren’t?
- Are you willing to monitor your results? (Then confront and solve problems when they pop up?)
Your answers will begin to define the outcome you’re looking for. When you know what you want, you can get the critical info and reports you need to achieve your vision.
What Financial Management Tools Do I Need?
Some of the main tools you will need to establish a successful construction accounting system include:
- Accounts to organize your financial results into useful information (i.e., a Chart of Accounts)
- A record-keeping method
- A billing and payment tracking system
- A payroll system
- Management accounting reports (at a minimum: a Balance sheet, Profit & Loss reports, and Job Cost reports)
- Training for your employees
- And to help you manage all of the above, accounting software that is highly customizable for your business.
NOTE: There are many additional features and tools in QuickBooks® designed to create the exact management system you need.
What If I’m New to Accounting for Construction?
That’s what we’re here for! BuildYourNumbers.com offers workshops and training to teach you the basics (and beyond!) so that your profits can mirror your expertise and skill.
It’s time to use your info to “add more profit$ to your pocket.”
If you have any questions, please email or give us a call.
“I’ve been looking for someone who could teach me practical accounting methods and best practices for our business so I didn’t have to hire a bookkeeper. Diane and her staff are easy to talk to, work with and learn from. The consulting calls are incredibly beneficial and the video lessons are a wealth of information – there for me whenever I need them. This has the investment I needed to make for me and our business!”