bookkeeping for construction companies

All of these factors can lead to irregular cash flow cycles and difficult financial management for construction companies. As a result, accurate accounting and careful financial analysis is essential for construction businesses to stay sustainable and grow. Retainage is a common practice in the construction industry where a percentage of the contract amount is withheld until the project is completed. This approach protects clients but can negatively affect cash flow for contractors. Properly accounting for retainage is essential for accurate financial reporting and effective cash flow management. Construction cost control software is designed to help construction teams effectively and accurately track project costs, forecast profitability, standardize processes, and ultimately grow the business.

Accounting Methods

bookkeeping for construction companies

They ensure accurate records, compliance with tax laws, and help track project profitability. It helps track expenses, manage cash flow, and make informed financial decisions. However, bookkeeping for construction companies can be complex and challenging.

Top 5 Construction Accounting Software

bookkeeping for construction companies

It summarizes project costs, income, and the difference between the two, providing valuable insights for each project. Unlike other reports, it offers flexibility in completion time, allowing contractors to assess project profitability whenever they find it suitable. Effective construction bookkeeping is not just a compliance necessity; it’s a strategic asset that drives profitability, fuels growth, and empowers informed decision-making. These software options can help construction companies manage their finances, track job costs, and create invoices. Additionally, many of these software options can integrate with other software, such as payroll software or project management software, to further improve efficiency. Construction companies have specific tax obligations that they need to comply with.

bookkeeping for construction companies

How is Construction Bookkeeping Different?

You can use Botkeeper to connect your books to your bank account and simplify reporting. It can also organize and pay bills for you, as well as collect payments and follow up on outstanding invoices. The high price and length of construction projects make payment scheduling and collection unique. Indirect costs are those which are essential to running your business across projects.

bookkeeping for construction companies

Best Construction Accounting Software for 2025

This helps you get a better idea of how much money is coming in and going out of your business every month. Apart from giving you insight into where your money is going, receipts also serve as proof of your business expenses in case you ever get audited. Union rates, travel pay, and taxes can also impact how much you’ll need to pay your workers. In most industries, commissioned contractors get paid upon delivery of a product or service. If you want to unlock advanced estimating and bill management, you will want the Advanced plan for $699 per month.

To calculate the current ratio, simply divide current assets by current liabilities. Importantly, the income sheet’s view of profit must match the change in equity reflected on the balance sheet. Janet Berry-Johnson, CPA, is a freelance writer with over a construction bookkeeping decade of experience working on both the tax and audit sides of an accounting firm.

bookkeeping for construction companies

What is an Accounting Department Diagnostic & How Does it Work?

Next, assess their reputation by looking into client testimonials, reviews, or case studies, which can give you insight into their credibility and reliability. This comprehensive guide is designed to help you navigate the complexities of bookkeeping in the construction industry. At the conclusion of this guide, you will be prepared to manage the financial issues that construction companies experience. Once the costs have been categorized, monitoring expenses closely against the budget is important.

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