Construction Bookkeeping: Essential Tools & Tips

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. Forbes Advisor researched the best construction accounting software on the market to help you find the right solution for your business. One effective way to track expenses is to use accounting software specifically designed for construction companies. Programs such as Sage 100 Contractor and ProContractor by Viewpoint can help with everything from job costing to managing purchase orders.

• Manual reporting methods are time-consuming and prone to errors, resulting in inaccurate data.
• They’re only required to use the percentage of completion method for construction contracts that extend over two years.
• QuickBooks for Construction comes in at the best value of all the options on our list.
• Revenue recognition is the process of officially recording how and when your business generates revenue.
• This helps ensure that nothing slips through the cracks in the construction process.

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This software platform is best for contractors seeking detailed bids from subcontractors and vendors to have the most comprehensive preproject data. Set the parameters and qualifications based on insurance requirements, location and experience. The platform manages the request through the documentation provided by vendors. You’re able to then compare vendors side-by-side to make the most educated decision.

Tip 5: Use milestone payments

Keeping track of payroll is another element where construction bookkeeping construction bookkeeping is essential. Unfortunately, it’s not as simple as agreeing on compensation with a worker and paying them the same rate per project. If you operate across state lines, you may also need to account for additional tax payments.

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General contractors should not only focus on current projects but also plan for future growth. Setting financial goals and creating a budget that supports business expansion is key to long-term success. By working with a professional accounting service, you can develop a growth strategy based on sound financial planning and construction bookkeeping principles. By https://www.inkl.com/news/the-significance-of-construction-bookkeeping-for-streamlining-projects leveraging digital invoice capture and automated approval workflows, you can streamline your invoice processing and payment cycles while eliminating the need for manual data entry. Digitizing your invoice management system allows you to capture invoices electronically, automatically extract data from them, and route them for approval without human intervention. With an automated approval workflow, you can accelerate the payment process and ensure that invoices are approved and paid on time.

Handling Complex Payroll

The platform starts with preconstruction details that include a cost catalog, lead management and a section for proposals and contracts. When you’re done with the preconstruction phase, you move into project management, operations and financials segments of the software that work concurrently. Not all standard accounting software has the features you need for the construction industry. For example, suppose your company uses progress billing on large jobs (where each invoice is charged against the total cost of the job over time until the balance is paid). In that case, your construction accounting software needs to be able to produce a schedule of values to help you track the running total. As one of the most popular types of accounting software for a construction company, many in the industry use QuickBooks for their needs.

You also need to keep in mind that the construction industry is highly susceptible to political and economic fluctuations. Construction companies often face complex tax regulations, especially when operating across multiple jurisdictions. Failing to comply with these requirements can result in audits and penalties.

This can improve collaboration and ensure everyone is on the same page, regardless of location. Any bookkeeping solution you choose should have these core features at a minimum. If your business has any unique bookkeeping needs, you’ll want to look for a solution that caters to those needs as well. 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. You could have one account reserved for paying expenses, another one for managing payroll, and a third one for receiving payments for clients.