The foundation for building a profitable construction business may begin with purchasing quality equipment and tools and hiring experienced people. However, most owners know that whatever segment of the construction business you are in, it is vital to know numbers. Being able to navigate the fundamentals of good accounting practices, state and local compliance, taxes, reporting can make or break the business.
So why is construction accounting so different from regular accounting? For a start, construction accounting is significantly more complex than it is for most businesses. It is known as a form of project accounting, when it is applied to construction projects. It become vitally necessary when multiple contracts are involved. <br>The construction industry uses many terms that are not found in regular accounting such as “draw” and “progress billing” but there are many more differences than just terms. Here’s a look at how construction accounting is different from retail or other types of accounting.
Construction accounting categorizes every aspect of a customer’s project.
The list includes: service work, consulting, engineering, labor, design, physical products and materials, and more. It also accounts for vehicles and equipment, which may or may not be owned by the company as a fixed asset. This type of accounting requires invoicing and vendor payments and business owners must fully understand such concepts as job-codes, cost-codes, and milestone-based billing, draw contracts, change orders, holdbacks, etc.
Secondly and most important, successful, accurate accounting is centered on the ability to track, report and categorize costs and other expenses in your construction business. Having and then being able to utilize this data is essential for understanding how to bid on projects, which projects are profitable for your business, how to bill clients accurately and fairly, and how to make the most of your firm’s resources. This done well becomes your company's competitive strength. Time, money and other resources are rarely wasted.
When you work with a reliable, public accounting firm with decades of experience in the construction market, you benefit from their ongoing contact with bankers, bonders, and law firms. They will be able to advise you on tax rules, compliance rules and the latest industry best practices that could impact the growth and reputation of your business.
TYS LLP has more than 60 years of combined experience in construction accounting and we can help get your business the help it needs to become more profitable and avoid any tax related issues that could pop up. TYS are experts in construction accounting and can help your company soar.