Accounting is vital for all businesses but when it comes to the construction industry, it becomes particularly unique due to the fluctuating costs of materials, demand, etc.
This can often leave many construction companies confused about what methods they should use. What’s so different about construction accounting compared to other industries? There are a variety of factors. For example, construction projects can sometimes be large and ongoing or one-time projects. Determining the proper costs for both can be more complicated than other industries. With so many factors integrated in these developments, including cost of materials, inflation, and demand, it can be a challenge to document cash flow if you don’t have a proper plan in place to prepare for all these moving parts.
Making construction accounting seamless in three ways
1. Develop clear, standard operating processes for your accounts receivable process
Sit down with your accountant to discuss a straightforward system to establish terms, creating and sending invoices. Clearly document this process so your entire team understands how it works. This standard operating procedure will make your accounts receivable process easier and seamless.
2. Categorize your job costs
Break down your operational costs into specific projects. This will be less stressful when it’s time for billing, estimating future projects and ensuring your current ones are on track. We suggest separating your costs into common categories such as, overhead, labour and materials.
3. Cash flow management
This is one of the most crucial aspects of your business. Take time to sit down with your accountant to discuss and create a cash flow plan so your business can remain stable over the coming weeks, months and years ahead. They’re easy to make and maintain, giving you peace of mind when it comes to inflow and outflow. You can also chat with your accountant about the timeline of your cash flow plan, it can be created by month or even by the week, depending on what works best for your company.
If you have more questions, give our DMC team a call today – we’re well versed in the construction industry and can help you on a steady plan for a seamless accounting experience.