Construction accounting is a unique form of accounting requiring 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.
What Financial Management Tools Do I Need?
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 want to ask questions about the frequency and type of cooking, family and entertaining requirements, and the types of appliances they’re looking for before you can begin to design the kitchen that will be best suited for (and delight) your client.
So it is with your accounting system. To create the ideal system for your business you’ll want to evaluate your own needs. You’ll want to define and clarify your vision of what you want for your company. Here are some sample 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?
- What are your financial goals for you and your family?
- What information will help you monitor 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 the wrong things when they occur?)
The answers will help you define the outcome you’re looking for. Then you can get the information and reporting system you need to achieve your vision.
Some of the main tools you will need to establish a successful construction accounting system include:
- A system for your accounts (i.e., a Chart of Accounts)
- A record-keeping method
- A billing and payment 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.
There are many extra tools in QuickBooks® designed to create the exact management system you need, but this is a good foundation.
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 begin adding “more profits 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!”