Construction bookkeeping is similar to bookkeeping systems for other types of businesses. However, there is a mobile component that a traditional brick-and-mortar operation does not deal with every day – the in-the-field nature of delivering a finished product, customized to each buyer’s blueprint. Take the cost of sales associated with working in this environment.
Cost of sales involves acquiring supplies and materials, securing materials delivery to the site, moving tools and equipment necessary to complete the build-out, allocating human resources to complete the project and then reversing all these steps upon project completion.
Building a mobilized bookkeeping system that works requires a unique approach that includes a toolbox stocked with:
- Excellent bookkeeping policy and process guidelines
- Current key performance metrics and shareable reports
- Project estimation tools to calculate direct and indirect job costs
- Sales and client acquisition skills
- Enhanced cash flow management strategies
Key Financial Reports For Contractors and Construction Companies
Breaking even in a constantly evolving atmosphere is difficult for many small contractors. To grow and prosper, every bookkeeping system must have up-to-date data driving profitability. These financial reports include:
- Accounts Payable
- Accounts Receivable
- Aged Receivables ( 30, 60, 90 day status)
- Balance Sheet
- Cash Available
- Change Requests
- Earned Value Reports
- Estimates Vs. Actual Reports
- Job Costing Reports
- Job Profitability Reports
- Profit & Loss Statement
- Work-In-Process Reports
Calculating Breakeven: Aiming for Profitability
While many of the data-driven reports, if accurate, drive better decision-making skills, calculating breakeven is complex. Even with an extensive cost library and pre-priced standardized formulas, bidding on a project relies on a stable market. Acquiring materials costs may change dramatically, as seen during the COVID-19 pandemic. An escalation in new construction, or a sudden decline due to unexpected market disruptions effect one-of-a-kind jobs, such as custom-built homes and commercial remodeling contracts. Having accurate key performance indicator reports is invaluable for successful job costing and profitability scoring.
How Outsourcing Bookkeeping Services Support Growth & Profitability
There are numerous ways that a professional bookkeeping service improves operational efficiency. Eliminating human error is one benefit that cannot be understated. Here’s an example:
Let’s say that John Contractor is on a job very similar to a recent project. He calls his in-house bookkeeper, or checks his mobile tool box for past project reports. Based on the figures he receives, he estimates the first job produced a $25,000 profit, and bids the new job accordingly. After delivering the bid, John Contractor realizes the report is wrong, due to duplicate data entries. The job actually came in with a $6,000 loss.
What does Mr. Contractor do? He can adjust the first bid, which will likely make the customer wonder if his building skills are better than his bookkeeping skills. In this case, the customer may either accept the new bid or have lost confidence in this contractor and move on to vetting others. He could also honor the faulty bid, which doesn’t make sense financially.
Outsourced bookkeeping services guarantee timely and accurate reports. And, they have software and skilled staff monitoring all data, ensuring the bid is based on real profits and losses.
Key Benefits of Working With Daaxit Bookkeeping Professionals
Partnering with Daaxit Bookkeeping professionals to manage your bookkeeping activities takes all the complexity of construction tax regulations and unique accounting rules off your plate. You get an experienced partner with decades of experience. That makes it easier for you to focus on growing your business.
Key services include:
- Accurate cost estimating tools
- Agility to adjust to changing workload
- Alerts when projects are not in line with budgeting
- Cash account reconciliation
- Clarity of your company’s financial health
- Financial report generation
- Financial resources to help you need to make better financial decisions
- Invoice preparation
- Knowledgeable partners who keep your records organized and accessible
- KPI reports
- Payroll support
- Project reports
- Proven strategies that drive higher profitability
- Reduced operating costs associated with in-house bookkeeping teams
- Streamlined internal workflow
- Tax compliance confidence
Construction projects can take months or years to complete. Maintaining accurate accounts is critical to success. Growth is good. But as a company grows, managing the company and all its projects in progress gets more and more complex.
Daaxit Bookkeeping services take the hassle out of monitoring your cash flow and individual projects efficiently. If you are ready for less stress and more time to focus on core activities, schedule a free consultation today.