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A day in the life of a construction contractor is not easy. You jump from project to project or often work on several projects at once.
While it’s possible for an owner like you to handle your company’s accounting and manage your books in the early phases of the construction business, it’s easy to overlook this area as more projects come in.
For any kind of business to stay afloat, owners should know the inflows and outflows of the money in the company. One way to stay on top of your finances is through proper bookkeeping.
With the large amount of work on hand, you’re likely thinking that it’s time to outsource your bookkeeping to a professional.
Yet, to manage your records efficiently, you need to hire a bookkeeper who specializes in construction bookkeeping.
Before we go into the details of why you need a construction bookkeeper for your company, let’s see first how is construction bookkeeping different from regular bookkeeping.
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Regular Bookkeeping vs. Construction Bookkeeping
Bookkeeping is the systematic recording of a company’s financial activities. Construction bookkeeping, from its name, is a form of bookkeeping that is unique to the industry.
Its main purpose is to allow construction companies to effectively track and record their incoming payments and expenses.
How is bookkeeping in construction different from other businesses?
Compared to regular bookkeeping, construction bookkeeping is more complex as contractors are often involved in various one-of-a-kind projects that have different requirements and costs involved.
For example, for a retail store, the business often runs the same from day to day. The cost of running it is relatively the same and could be predicted over time.
On the other hand, construction work deals with scattered custom projects and runs on a cycle of beginning-middle-end, unlike a retail business that has a continuous operation.
There are also plenty of direct and indirect costs that are associated with each construction project, making it difficult to record these costs without efficient bookkeeping.
Given that record-keeping in construction is tricky, it would be highly advantageous for you to hire a construction bookkeeper who understands your industry and what it takes to manage your books properly.
Let’s jump into reasons why should you consider outsourcing a construction bookkeeper…
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Reasons to Hire a Construction Bookkeeper
1. Establish a realistic budget
An effective budget is essential for a construction company to identify its needs, manage unexpected circumstances and more importantly, turn a profit. Proper bookkeeping allows you to create a more precise budget when their records are updated.
To be more specific, construction bookkeepers help you establish a budget by:
- Properly tracking the company’s income and expenses – You then have factual data on your financial records showing what type of services create more profit and which ones do not. This way, you would know which construction services you should channel more budget into and avoid funding services that don’t turn in much income.
- Identifying the best financing opportunities for the company – Should there come a time that you would need funding for an investment or another construction project, a bookkeeper can provide you with the pros and cons of the loans you will want to avail of. More than keeping your financial records straight, bookkeepers are knowledgeable about different kinds of loans so you can definitely discuss with your construction bookkeeper about financing opportunities for your business.
- Making suggestions for future purchases – Bookkeepers have a good understanding of taxes, and you can leverage their knowledge by consulting them about what materials or equipment qualify for a tax deduction.
In addition, bookkeepers know the depreciation of construction equipment so you can ask them about what purchases you should make that do not depreciate quickly.
2. Create Successful Bids
Every contractor knows that for them to create successful bids and win projects, they should have a good idea of the costs that are involved in each job.
These expenses include labor, materials, and even the time that would be spent to complete a project.
With a construction bookkeeper making sure that your books are accurate and up-to-date, you can quickly refer to your records and have a good idea of the amount of a project.
This also ensures that you place the right bid and that it is profitable.
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3. Implement the right bookkeeping system
The first thing that a reliable bookkeeper would do when you engage with them is to help you choose and implement a bookkeeping system that is ideal for your construction business.
If you still don’t have one, a cloud-based bookkeeping system is vital for your construction company since most of your working hours will not be spent in the office.
A mobile bookkeeping system allows you access to your records anywhere you are, even if you jump from site to site.
With a bookkeeping system in place, your bookkeeper can help you organize your finances, and record your transactions on this platform.
They can also quickly find the data that you need should you need it to monitor your financial health or if the IRS request a record of your finances.
4. Gain more investors
As your construction company takes in more projects and upscales, you will need funding from more investors. To convince the investors to put their money in your construction business, they need to have a good understanding of your firm’s current financial status — and this is where financial statements are essential.
With a construction bookkeeper in your team, you are assured that your financial transactions are correct and updated, and they can help you to also produce financial statements that your investors will require.
5. Properly meet tax obligations
Running a construction business means you’re required to pay taxes. And I know you don’t want to have trouble with the IRS because of incorrect filing or you missing your due date.
When you hire a bookkeeper for your construction company, you have a clear idea of what your tax liabilities are, making sure that you file the correct tax returns.
You also know that your records are kept well-maintained, so you can refer to them should discrepancies with your legal obligations occur.
To put it simply, with an efficient construction bookkeeper, you are confident that your tax obligations are well taken care of.
The most important takeaway here is that you are not alone when it comes to bookkeeping for your construction business.
Instead of trying (and probably failing) to keep your books updated, consider hiring a construction bookkeeper so can focus on other important aspects of running your business.