Bookkeeping can be one of the most daunting processes when you’re running your own business. Maintaining accurate records of financial transactions ensures an overview picture of your company’s financial health. The process seems to be overwhelmed at the first glance. However, we’ve compiled 10 tips to make bookkeeping in construction as simple as possible, successful bookkeeping methods would ensure your business function effectively and transparently.
Use different checking accounts
To effectively keep track of expenses and profit, your company should main separate accounts that serve different purposes. It’s highly recommended that you should have at least 3 accounts. The first account should serve as the account where you deposit all the money you’re earned. The second account uses for the purpose of payroll only. And the third account serves as a cash account. In this way, you can see how much cash you have on hand. A breakdown of income and expenses for each project ensure the profitability of your construction company.
Keep track of receivables
Since every construction job is invoiced periodically and there are multiple projects going on at the same time and, it’s vital to track invoices. By carefully recording every payment you receive from clients, you will always know who is paid up and who is late.
Keep backups of records
Bookkeepers usually keep all invoices and receipts just in case. However, it’s better to keep both hard and digital copies, in case a hard copy gets damaged or lost, you can access and restore it easily with a digital copy.
Report on Work-In-Progress Projects
More often, construction companies may be taking on a range of projects at any given moment. Frequent change orders and unforeseen changes of expenses also occur during the course of the job. Therefore, you should be reporting on the completed projects as well as those that are still working on. This financial reporting tool can show if you’re over or under billed and cash positive or negative, not only for each project but the entire company.
Keep track of bills
Keeping track of many jobs is one of the most challenging aspects of bookkeeping in construction. Unlike other industries, construction production is product-based, decentralized, and long-term, and projects can vary widely in length and scope. All of these factors result in a wide range of costs. These costs could be materials and labor, with additional charges for consulting and architectural fees, not to mention indirect costs, such as equipment rentals, insurance, etc. Your bookkeeper would be responsible for recording every transaction that occurs during a given task.