Bad bookkeeping habits can set your construction company up for disaster. Bookkeeping is a significant accounting function for determining the financial health of your company. If you are not diligently recording transactions in an organized manner, your financials will be a mess. With messy financials, how can you confidently make decisions and ensure the profitability of your construction company? Below are tips to improve construction bookkeeping, so you can be confident in your books and get ahead of the game.
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Outsource construction bookkeeping
Perhaps it may not make sense to have an in-house bookkeeper. Sometimes there is not enough work to keep an individual busy full time or you would rather add headcount to your field labor force. In those cases, it may make sense to outsource construction bookkeeping. A danger many companies do is add bookkeeping as a collateral duty to an office manager or receptionist. For one thing, it is not a part of their skill set. Additionally, what happens when that one person is out sick for a length of time or leaves the company?
It may be in a company’s best interest to outsource bookkeeping to a highly skilled specialist or team of specialists. Just as your labor force is skilled at their trade, a good bookkeeper is skilled at their trade as well. Outsourcing your bookkeeping lets you focus on your construction business and the work of construction versus bookkeeping.
- When to Consider Outsourcing: Sometimes, maintaining an in-house bookkeeper may not be cost-effective or practical. Outsourcing bookkeeping to specialists can be a smart move, ensuring expertise and accuracy in financial management.
- Benefits of Outsourcing: Outsourcing allows you to focus on core construction activities while professionals handle your financial records with precision.
Using the right accounting software
When your company is ready to take on bookkeeping and account functions in-house, accounting software will be helpful in keeping your team organized. Accounting software helps bookkeepers record financial transactions in one centralized location.
There is lots of different accounting software on the market. Many are finely tuned based on the specific needs of a small, medium or enterprise-sized business. With many small to medium-sized construction businesses, general accounting software may be suitable. However as the company grows, it may make sense to start exploring accounting software developed specifically for the construction industry. It will help make construction bookkeeping easier as the company grows and the financial transactions become more complex.
- Tailored Accounting Software: As your construction company grows, consider using specialized accounting software designed for the construction industry. Such software can streamline complex financial transactions.
- Centralized Recording: Accounting software provides a centralized platform for recording financial transactions, making it easier to track expenses, revenue, and project costs.
Back up all relevant records
Bookkeepers must organize and store everything from invoices to receipts. If you choose to keep hard copies of documents, the bookkeeper must organize them in a way that is easy to find. Additionally, the bookkeeper should store them in a fireproof filing cabinet. A best practice would be to create a digital copy in the event that the hard copies get damaged or lost. It can be stored in the accounting software or in a cloud-based storage system. The beauty of a cloud-based storage system is that the information is safe in the event of physical damage to the building or server. The one catch is that when you no longer pay your subscription, you will lose access to your important documents.
- Hard Copies and Digital Copies: Maintain organized records of invoices, receipts, and other financial documents. Store hard copies in fireproof filing cabinets for security.
- Cloud-Based Storage: Create digital copies of important documents and store them in a secure cloud-based system. This ensures data safety, even in the event of physical damage to your office.
Recording job costs
One of the core parts that make construction bookkeeping complex is job cost tracking. Recording financial transaction to projects and tasks enables construction owners to track accounts receivables and payables by specific projects. How close are our actuals tracking against the estimates?
Tracking costs to specific jobs will help the owner determine which projects are more profitable than other projects. Learning this information will help refine estimates by providing historical job cost information or even allow the construction company to specialize on specific projects.
- Complexity of Job Cost Tracking: Construction bookkeeping often involves intricate job cost tracking. Record financial transactions related to specific projects and tasks to monitor accounts receivables and payables.
- Enhanced Profitability Analysis: Tracking costs by project allows you to determine which projects are more profitable. This data can help refine estimates and guide strategic decisions.
Track change orders diligently
Change orders are a norm in construction. They have the power to make or break profits on a project. Construction bookkeepers must diligently track change orders and their effect on the overall budget. Bookkeepers can record any extra materials or labor used to the change order specifically rather than just the job. This will help the construction bookkeeper, project manager, and owner know exactly how much the change orders can take a project’s financials sideways.
- Impact of Change Orders: Change orders are common in construction and can significantly affect project profitability. Ensure meticulous tracking of change orders and their impact on the overall budget.
- Detailed Recording: Record extra materials or labor used for change orders separately, providing clarity on their financial impact.
Integrate with other software systems
Although they are not out their building, the accountants and bookkeepers are getting their hands dirty. They are working through all the financial data to ensure the project is a financial success. Accounting is a critical part of the construction project workflow. The field team provides information to the accounting team in order to process billings. The Accounting team provides information to the project management team in order to track project profitability. Project and financial information flows throughout every department. It may not make sense for a company to move to an all-in-one solution. However, it makes perfect sense that the financial information flows freely between all departments within a company and their corresponding solutions. Whether it is a direct integration with automatic synchronizing or import of information, the seamless flow of information will minimize manual entry and ensures accuracy of information.
Bookkeeping is the recording of financial transactions—purchases, sales, receipts, and payments. It begins as a simple process of ensuring the input of cash is larger than the output of cash. However, to position your construction company for long-term financial success, bookkeeping is a serious function that one should manage meticulously. Good construction bookkeeping provides owners with the confidence of financial health and long-term viability.
- Efficient Data Flow: Streamline the flow of financial information between different departments by integrating accounting software with project management and billing systems.
- Reduced Manual Entry: Integration minimizes manual data entry, reducing errors and ensuring data accuracy across departments.
How eSUB Construction Software Enhances Construction Bookkeeping
In the quest for impeccable construction bookkeeping, the right tools and software can make all the difference. eSUB Construction Software emerges as a game-changer, revolutionizing the way construction companies manage their financial records and streamline their operations.
Outsourcing Simplified: With eSUB, the need for outsourcing construction bookkeeping can become a thing of the past. Our software offers a specialized solution designed to cater to the unique demands of construction bookkeeping. You can confidently keep these critical tasks in-house, ensuring accuracy and control over your financial data.
Tailored Accounting Software: eSUB provides you with the ideal accounting software tailored for the construction industry. As your company grows and handles increasingly complex financial transactions, our software simplifies construction bookkeeping. Centralized recording and organization become second nature, enabling you to effortlessly track expenses, revenue, and project costs.
Effortless Record Management: Say goodbye to the hassles of managing piles of hard copies of financial documents. eSUB’s cloud-based storage system ensures your records are not only secure but also accessible from anywhere. Even in the face of physical damage to your office, your important documents remain safe and retrievable.
Comprehensive Job Cost Tracking: eSUB’s construction software excels in job cost tracking, simplifying the intricacies of construction bookkeeping. You can effortlessly record financial transactions related to specific projects and tasks, allowing you to monitor accounts receivables and payables with precision. Analyzing project profitability and refining estimates becomes a breeze.
Change Orders Made Clear: Tracking change orders is vital in construction, and eSUB helps you do it diligently. Our software enables detailed recording of extra materials or labor used for change orders separately from the main project. This level of clarity empowers construction bookkeepers, project managers, and owners to understand the financial impact of change orders.
Seamless Integration: eSUB promotes efficient data flow and minimizes manual entry by seamlessly integrating with various software systems used across different departments. Financial information freely circulates between departments, from accounting to project management, ensuring data accuracy and reducing errors.
In conclusion, eSUB Construction Software is your trusted partner in achieving impeccable construction bookkeeping. With our specialized accounting software, streamlined record management, and seamless integration, you can confidently manage your construction company’s financial health and long-term viability. Say goodbye to bookkeeping woes and embrace a brighter future for your construction business with eSUB.
FAQs – Actionable Steps For Improving Construction Bookkeeping
1. Why is construction bookkeeping important for a construction company? Construction bookkeeping is crucial for determining the financial health of a construction company. It involves recording financial transactions, tracking job costs, and managing budgets, which are essential for making informed decisions and ensuring profitability.
2. When should a construction company consider outsourcing bookkeeping? A construction company should consider outsourcing bookkeeping when there isn’t enough work to keep an in-house bookkeeper busy full-time or when it’s more beneficial to add headcount to the field labor force. Outsourcing to skilled specialists can ensure accurate and organized bookkeeping.
3. What role does accounting software play in construction bookkeeping? Accounting software helps streamline construction bookkeeping by providing a centralized location to record financial transactions. There are various accounting software options available, and as a construction company grows, it may be beneficial to explore software specifically designed for the construction industry to handle complex financial transactions.
4. How should construction companies back up relevant records for bookkeeping? Construction companies should organize and store invoices, receipts, and other financial documents. Hard copies should be stored in a fireproof filing cabinet, and digital copies can be created and stored in accounting software or a cloud-based storage system for added security.
5. Why is job cost tracking important in construction bookkeeping? Job cost tracking is essential in construction bookkeeping because it allows construction companies to track accounts receivables and payables by specific projects. This information helps determine project profitability, refine estimates, and make informed decisions about which projects are more profitable.
6. How should change orders be handled in construction bookkeeping? Change orders should be diligently tracked in construction bookkeeping. Construction bookkeepers should record the extra materials or labor used for change orders separately from the main project. This provides clarity on how change orders impact a project’s financials and allows for better financial management.
7. Why is integrating with other software systems important for construction bookkeeping? Integration with other software systems ensures the seamless flow of financial information between various departments within a construction company. This minimizes manual data entry, reduces errors, and enhances accuracy in financial reporting, billing, and project management.
8. What is the primary goal of construction bookkeeping for a construction company? The primary goal of construction bookkeeping is to provide owners with confidence in the financial health and long-term viability of the construction company. It involves meticulous management of financial transactions to support informed decision-making and profitability.