Construction Bookkeeping – Why it’s Different
Updated: Jan 20, 2021
If you own a construction or real estate development company, you need a bookkeeper with construction bookkeeping expertise. Like all businesses, accurate and detailed financial reporting is key to growing a construction business. Construction bookkeeping adds an extra layer of complexity with the unique need for job costing, progress invoicing, and real estate investment reporting.
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Construction Bookkeeping: Job-Costing & Profitability Reporting
Your first bookkeeping concern as a construction company is job cost reporting. Accurate job profitability reports provide the information needed for successful bidding. You need to make sure your accounting software is set up correctly and updated often with all project cost details. To ensure you are investing in a bookkeeping service that will work best for your business, choose someone with job-costing and construction industry experience.
Construction Bookkeeping: Progress invoicing and Percent-to-Completion Project Draws
After job-costing, your next bookkeeping concern is process invoicing and percent-to-completion project draws. This is important if your company bills clients or receives draws on construction loans based on percent-to-completion of the project. To present accurate information to clients and investor your books should be detailed and updated often. This will rely heavily on how you track your project costs. When considering a bookkeeper for your business, make sure to ask them about their experience with progress invoicing and percent-to-completion projects.
Real Estate Investment Bookkeeping: Reporting
Next, ask your potential bookkeeper about the knowledge of real estate taxes. Whether your main business is flipping houses or you have a real estate rehab project from time to time, there are specific tax rules that apply to this type of investment that require you to have a construction in progress asset account. This asset account will not only include the purchase price of the property but all of the expenses associated with it until it is ready to sell. You need to ensure that your bookkeeper has a good understanding of when an asset is considered construction-in-progress and how to set up your accounting software so it will report correctly on your balance sheet and profit and loss statements. If done correctly, you will save on billable hours with your CPA during tax season and impress your potential investors with accurate financial statements.
When considering a bookkeeper for your construction or real estate development company, you need someone experienced in job-costing, progress invoicing, percent-to-completion projects, and real estate investment reporting. Ask them how they approach these challenges and what software have they used to do it efficiency. Your goal is to find quality bookkeeping that will save you time, money, and provide accurate information to help you grow your business.
BMS Books is a small business bookkeeping firm that specializes in industry-tailored bookkeeping. We are able to offer quality services at a affordable price by streamlining our workflows through technology. Contact us for a free consultation at firstname.lastname@example.org