When it comes to running a construction firm, bookkeeping is one of the most important aspects of keeping your finances in check, your budget balanced, and your business profitable. But construction isn’t like a sales-based business, which may only have a single revenue stream and predictable expenses from quarter to quarter. That’s why it’s crucial to find a bookkeeper that knows the intricacies of the construction industry, and can help with things like job costing, payroll, and taxes—all within your specific market. If you’re looking for a bookkeeper to help your construction business, here are a few things to know.
Why Construction Bookkeeping Is Important
Many construction businesses depend on different jobs of varying sizes, often happening simultaneously—and this arrangement only gets more complicated the more your company grows. For example, operating in different states may incur different fees and taxes that need to be accounted for separately, or supply chain issues may drastically change the cost of the same materials from job to job.
This decentralized nature of profit is the foremost reason by good bookkeeping is essential to a profitable construction firm because the central issue of cash flow has to be accounted for every step of the way. Bookkeeping allows a firm to understand its breakeven point through a complex set of calculations called Job Costing, which allows managers to identify profitable projects. And since profit margins can be so slim—between 1.4% and 3.5% before tax according to the Construction Financial Management Association—proper bookkeeping for construction companies is essential for staying in the black.
Other industry-specific issues that can impact a construction company include:
1. Payroll Considerations
Variable compensation rates from project to project, bonuses, overtime, and even worker’s compensation all make keeping an accurate and timely payroll in the construction industry more complicated than just counting when an employee clocks in and out. Good bookkeeping accounts for aberrations in compensation, keeping your employees happy and your projects progressing on schedule.
2. Direct and Indirect Costs
Direct costs are the straightforward prices a construction firm pays for its materials, labor, etc. Construction companies also incur crucial indirect costs (sometimes large ones) which are largely considered the cost of keeping your business going. Smart firms should find a bookkeeper that can accurately track indirect costs like delivery fees, gas prices, equipment repairs, insurance, and more.
3. Contract Duration and Payment Agreements
Because building projects can take years to complete, and because conditions like building codes, taxes, and material costs can change in that time frame, many contracts require a nuanced payment process spread over time. Construction bookkeeping practices must account for delayed, unfulfilled, or changing payments when budgeting or filing taxes.
Some of the best bookkeeping tips for construction businesses come from experts who know the applicable tax laws, building codes and work timelines that are specific to the industry. Often, good bookkeepers can spot potential financial pitfalls before they happen, saving you time and, most importantly, costly mistakes.
Things to Consider When Hiring a Bookkeeper
It’s important to think of a bookkeeper as a kind of partner for your business—one that you can trust to know the innermost workings of your company and depend on for the information you need to make important decisions. If you’re wondering how to find a good bookkeeper that can fulfill this role for your company, it’s important to keep a few things in mind.
As previously established, bookkeeping for construction companies requires advanced skills, an understanding of local laws and tax codes, and industry best-practice. When attempting to find a bookkeeper, ascertain whether they have ever worked with construction firms similar to the size of your company before and whether they work solely within your state. This may be applicable if you intend to grow your business beyond state lines.
Like in most small business accounting services, the quality of service can vary based on the qualifications and requirements of the staff and business. Be sure to seek out bookkeeping firms that are licensed to work in your state, employ CPAs and licensed business professionals, and are members of recognized accounting organizations to ensure they are operating under the proper oversight.
Bookkeeping services should have core strength in accounting as underpinning for all other services offered. Ensure that they are equipped to handle your company’s financial ledger, can properly balance your budget, and manage accounts payable/receivable.
As payroll is one of the largest expenses a construction firm might incur, find a bookkeeper that is equipped to handle payroll services in-house. Combining the two services can save money and prevent inefficient communication from disrupting your payroll accuracy.
A good bookkeeping service should be able to report key metrics on your business like profit and loss statements and expense reports, handle invoicing and billing, and prepare your tax filing whether yearly or quarterly.
Make use of a bookkeeping firm’s online reputation by checking their online reviews. Look for mentions of professionalism, ease of use, timely responses, and areas of expertise.
Understanding these core principles and how they relate to your business can help you find a bookkeeper that’s not only beneficial but instrumental in the growth of your firm.
How Appletree Business Services Can Help Your Construction Firm
Appletree Business Services has been providing accounting, payroll, and bookkeeping services for small businesses for almost 40 years, with specialized experience in the construction industry. Our clients can attest to our skills and reputation when it comes to helping you manage your business and meet your financial goals. Call us or visit our website to schedule an appointment with a certified business professional and let us help your construction firm find new success.