What Are the Best Bookkeeping Practices for a Small Construction Business?

Job costing is a process that helps you determine the costs of working on a project. Here are six aspects of the industry that make effective construction bookkeeping vital. For one, there’s a large variety of financial transactions in the construction industry. Accounting for all of them can be overwhelming, especially for nonaccountants. Additionally, they will ensure that the construction company complies with all regulations. Construction payroll wages can vary greatly depending on the location of the job, the size of the job, and the individual skill level of the employee.

QuickBooks for Construction

So no two jobs are alike, making intentional contractor accounting essential for accurately conveying the financial wellbeing of your construction company. NerdWallet’s construction accounting software roundup favors products that have industry-specific features or integrations and prioritize job costing tools. Job costing, in particular, is one of the main factors that sets construction companies apart from other types of businesses. Their books revolve around service-based projects as opposed to the sale of particular items. For more information about our star ratings process, see how we rate small-business accounting software in general. Touted as America’s #1 construction accounting software, Foundation is another popular option for contractors and small or medium-sized construction businesses.

• Manage employees with a built-in time clock and store photos, videos and documents in the system for easy access.
• The system also allows you to scan and organize receipts so that all project expenses are kept in one place.
• Sage Intacct Construction and Sage Intacct Real Estate is designed for contractors and owners to be able to manage properties and projects effectively.
• Construction clients may additionally withhold some percentage of a contract’s payment to a contractor or subcontractor until a time specified in the contract to the owner’s satisfaction.
• Its feature-rich platform starts by allowing you to manage multiple companies where you differentiate projects.

Cost of Goods Sold

Additionally, while a non-certified accountant could handle some of your bookkeeping needs, you should focus on certified and licensed accountants to stay on the safe side. First, break down the project into phases, and then list all the tasks needed to complete each phase. Construction companies usually need to pay their workers what’s known as a prevailing wage. You also need to keep in mind that the construction industry is highly susceptible to political and economic fluctuations. 95+ years of combined experience covering small business and personal finance. Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website.

Record Day-to-Day Financial Transactions

Construction accounting software can save you time and help keep you organized when managing your building projects. By integrating preconstruction parameters, such as bidding and cost building, contractors can quickly move a project from the prework phase into the project management and building phases. Construction software becomes a one-stop platform for everything from prices to contracts and compliance. This helps ensure that nothing slips through the cracks in the construction process. Specialized accounting software is available to help construction contractors manage their business finances and the various projects that they may be involved in. Most of these solutions include accounting features to support your business from the bidding process to invoicing.

What Are the Best Practices for Managing Cash Flow in Construction?

Most expense tracking in the construction industry is done via job costing. This method of accounting tracks income and expenses along with the job they relate to. Job costing is most effective when conducted by your construction accounting software. After the project is completed, construction companies perform How Construction Bookkeeping Services Can Streamline Your Projects a post-job review to analyze and assess the job’s overall profitability. Next, you should be using multiple bank accounts to simplify your contractor accounting.

• They can choose between the cash method or the accrual accounting methods.
• You can use Botkeeper to connect your books to your bank account and simplify reporting.
• Many construction companies use a “completion percentage” approach, meaning they calculate estimated taxes based on quarterly income and expense reports.
• Foundation strives to serve construction companies of all sizes, ranging from small businesses to large enterprises.
• Construction companies either own their equipment or rent it for particular jobs.
• Its purpose is to enable construction companies to have a better understanding of their financial situation through tracking and recording both expenses and incoming payments.
• Forbes Advisor researched the best construction accounting software on the market to help you find the right solution for your business.

• If you have any additional questions, feel free to contact us at 4Corner Business Services.
• To ensure you aren’t surprised by a customer withholding part of the fee you’re owed, make sure you account for contract retainage properly when budgeting for a project and invoicing clients.
• The revenue management component manages owner contracts, invoicing, cash receipts and projections.
• In his free time, you’ll find Jason on the basketball court, travelling, and spending quality time with family.
• It’s crucial for construction bookkeeping to forecast financials because you’re often dealing with large value contracts and relatively low margins compared to other industries.
• It ensures that the contractor meets all requirements and that the customer is satisfied with the performance before delivering the full payment.

With a more secure, easy-to-use platform and an average Pro experience of 12 years, there’s no beating Taxfyle. Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction.