Contractors
June 10, 2024

Top Bookkeeping Tips for Building Contractors

Our CPAs offer bookkeeping tips to building contractors to ensure their books are accurate.

Construction is all about meticulous planning and building a solid foundation. But what about the foundation of your business – your finances? Strong bookkeeping practices are essential for any successful business, and construction companies face unique financial challenges. Our team of expert accountants put together some top tips to keep your construction bookkeeping on solid ground.

Project-Centric Tracking

  • Separate Project Accounts: Treat each construction project as its financial entity. Set up individual accounts to track income and expenses specific to each project. This allows you to accurately monitor profitability and identify areas for cost optimization.
  • Detailed Job Costing: Track all project-related expenses, including material costs, labor costs, equipment rentals, and permits. This detailed record-keeping allows you to accurately estimate project budgets, ensure profitable bids, and identify potential cost overruns early on.
  • Retainage Management: Many construction contracts involve retainage, a percentage of the total project cost withheld until project completion. Track retainage due on each project and ensure timely release upon project acceptance.

Cash Flow Management is King

  • Track Milestones and Billings: Construction projects often involve progress payments to specific milestones. Track these milestones meticulously and issue invoices promptly to maintain a healthy cash flow.
  • Manage Customer Payments: Offer flexible payment options for customers and have clear late payment policies in place to avoid cash flow disruptions.
  • Monitor Accounts Payable: Pay invoices on time to maintain good vendor relationships. Negotiate favorable payment terms whenever possible to optimize your cash flow.

Embrace Technology

  • Cloud-Based Accounting Software: Invest in user-friendly cloud-based accounting software for construction businesses. These programs can automate tasks like expense tracking, invoicing, and payroll processing, saving you valuable time and minimizing manual errors.
  • Mobile Receipt Capture: Use mobile apps to capture receipts and categorize expenses on the go. This eliminates the need for paper trails and streamlines your bookkeeping process.
  • Construction Management Software: Consider integrating your accounting software with construction management software. This can create a central hub for all your project data, simplifying data entry and enhancing project budgeting and cost tracking.

Tax Time Preparation

  • Understand Construction-Specific Deductions: Construction businesses are eligible for various tax deductions, including equipment depreciation, material costs, and labor expenses. Familiarize yourself with these deductions and keep detailed records to substantiate your claims come tax season.
  • Consult a Tax Professional: Tax laws can be complex, especially for construction businesses. Consider consulting with a tax advisor experienced in the construction industry. They can help you navigate tax regulations, ensure compliance, and maximize your tax benefits.

By implementing these bookkeeping tips and leveraging technology, you can build a solid financial foundation for your construction business. Remember, efficient bookkeeping practices are a cornerstone of success in the ever-evolving construction world. So, keep your books in order and watch your business reach new heights!

Call Performance Financial For Bookkeeping Services for Contractors

When you need bookkeeping services for your construction company, call Performance Financial's trusted, experienced accountants. We offer complete accounting, tax preparation and planning, bookkeeping, and payroll services in Des Moines, IA. Contact us today to schedule a consultation!

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