Running a construction business isn’t like running other goods or services-centered businesses. Shifting costs, increased liability, and a job-centric pricing model are just some of the major differences that make contracting a unique business—and unique businesses require a different approach to their bookkeeping. From taxes to job pricing to payroll, good bookkeeping is more than just tracking receipts, it can make your business more efficient and profitable while keeping you out of trouble when it comes to fines or choosing jobs that just aren’t worth your time. Here are a few bookkeeping tips from the professionals at AppleTree Business Services for construction companies.
Why Is Bookkeeping Important for the Construction Business?
Consider a simple goods-centered business like a T-shirt company. Their quarterly costs for inventory and payroll might change slightly based on the number of sales they make, but it’s more than likely that their finances will remain fairly constant, making it easier to track sales, profitability, and costs.
Contrast this with a construction company and the differences become sharp. First, different jobs require different materials, the prices of which can vary wildly depending on what’s needed. After that, unforeseen and one-off fees like equipment repair or worker’s compensation can eat into profitability. Finally, the cost of shoddy bookkeeping itself can create issues if your business is audited. These are just a few examples of the complexity related to bookkeeping for construction companies.
Once you prioritize good bookkeeping, however, you can start to see the benefits and potential growth than come from staying organized. Essentially, keeping better records of your finances allows you to choose jobs that are more profitable by comparing past expenses, TK and TK—not to mention saving you money on your quarterly or year-end tax bill. What can seem like a complicated or tedious process actually brings your company stability in the face of fluid revenue. If there’s one thing a contractor should be able to appreciate, it’s the importance of stability.
The bookkeeping tips that serve a T-shirt company won’t necessarily work for your small business, so let’s take a look at some easy methods for how to do bookkeeping for small construction businesses.
Construction Bookkeeping Tips
Proper bookkeeping is a skill and professionals work for years to learn the right methods and strategies for efficient record-keeping that satisfies all the necessary legal and financial requirements. That being said, you can perform the services you need by staying organized and researching some tried and tested methods. If you plan on doing your bookkeeping yourself, here are some of the best bookkeeping construction tips to familiarize yourself with.
Keep Your Records Safe
Documentation is crucial to good bookkeeping. This can look like keeping receipts, invoices, and order forms in organized and easily accessible places, either as physical documents or digital files on a company computer. It’s important to have a backup plan in place in case your records are damaged, lost, or destroyed.
Record Expenses
Of all the bookkeeping tips we can give you, this one might be the most important: accurately record your business expenses. Costs can vary widely from job to job depending on materials, labor, and fees, but understanding your past expenses is the most crucial step in accurately pricing future jobs. Keep track of every transaction made on your company’s behalf and update your records frequently.
Track Employee Hours Accurately
Keeping track of your workforce can be another difficult aspect of construction bookkeeping. With job sizes varying, overtime to account for, and a highly mobile workforce, it’s crucial that you keep track of your employees’ comings and goings to ensure accurate and timely payroll payments.
Keep an Accurate Inventory of All Materials
Inventory and materials can be fluid when it comes to a job. It’s not uncommon to require more materials than you originally planned for, or to have leftovers when a job is done. By keeping a detailed inventory of the materials your company owns, you can better see where your resources are being spent and cut down on wasted materials and expenses.
Check Your Records Frequently
Construction work is fast-paced and requires you to manage multiple operations at once. Setting aside a specific amount of time every day or week to update your financial records and check for disparities can save you time and effort in the long run while ensuring your bookkeeping is accurate.
Find the Right Insurance for You
Construction firms assume more liability than other businesses and operating without insurance can be both physically and legally dangerous. Establish the kind of insurance you need early on and account for the yearly or monthly cost as part of your business expenses.
Be Aware of Tax Deadlines
Tax deadlines can sneak up on busy business owners faster than you might think. Keeping accurate records throughout the year will make year-end tax accounting easier if you plan to do it yourself. You may also decide you want to pay a quarterly estimated tax, which can result in a lower overall tax burden. Doing so requires an organized tax system, however, and you must stay aware of four tax deadlines throughout the year instead of just one.
Separate your business from your personal finances
A good way to keep track of your business expenses is to open a separate business account. This can help you better track large or important expenses, manage your cash flow, and pay employees or suppliers without affecting your household finances. To open a new business account, you’ll need:
- Your social security number or employer identification number (EIN)
- Personal identification documents like a driver’s license or passport
- Your business license
- State-approved organizational documents
Don’t Go It Alone
The most important aspect of bookkeeping is knowing that you’re not required to figure it out yourself. Depending on your experience or desire to learn, it might make more financial and business sense to hire a professional accountant or bookkeeper to look after the intricacies of your records for you. Having a bookkeeper to monitor and process expenses, bills, and invoices can help you manage multiple accounts at a time, allowing you to focus on meeting deadlines, managing employees, and getting your job done. A certified accountant can also help you structure your accounts in the most efficient ways to save money and avoid paying taxes.
At Appletree Business Services, our accountants and CPAs have years of experience helping construction businesses reach their full potential through accurate bookkeeping and payroll services. We’re ready to help your firm with the services you’re too busy to take care of yourself, but still need to get done. Things like deciphering income-to-expense ratios, managing your financial records, generating easy-to-understand reports, filing tax payments, and more. If you feel like you’re ready to get your bookkeeping under control with an attentive and experienced professional, call us today for your first consultation.
