The construction industry, just like the other industries in the market, needs to be perfect in its record-keeping and tracking transactions. No better way than construction bookkeeping is available to keep track of things. It would be best to consider it much different from general accounting and financial management as the activities are almost identical. This article will explain what construction bookkeeping is and what it incorporates, followed by useful tips. Keep reading to know more!
What is Construction Bookkeeping?
Construction bookkeeping is all about managing and tracking construction transactions. It involves strategies and tips that help you understand the financial position of your construction project. Managing a company’s bookkeeping will involve the following points.
- Design strategies to reduce costs
- Track costs and revenues
- Define and manage project budget
- Manage the entire construction project
- Keep track of transactions
- Record materials quantity and cost
- Ensures transparency across the whole project
Construction is a complex project with numerous puzzles to solve. Keeping the accounts in order and tracking revenue and costs is more vital of all the crucial activities. You can hire expert bookkeeping and accounting firms in Dubai if you have a hard time finding a reliable accounting partner.
Essential Concepts to Know in Construction Bookkeeping:
Construction bookkeeping is vital in helping site managers and project supervisors in understanding cost and revenue models. This assistance is driven by the essential concepts involved in this area. Let us go through a brief description of these concepts.
i) Job costs:
Project managers and supervisors are more concerned about improving estimates and project budgeting. Job costing incorporates numerous costs, cost types, and cost activities that help managers understand project costing activities. For a successful construction project, accurate job costing accounting is essential.
Do you want to know the driving factors of a successful construction project? They are cash flow analysis and accurate gross profit. With these two aspects in order, accurate job costing accounting is not difficult to achieve.
ii) Fixed prices:
Fixed cost depends on a nitty-gritty estimate that presents the total expense for the whole project, beginning to end. Charging a fixed-value measure frequently occurs on a percentage of completion basis. The risk is that if there are any overruns in light of changed site conditions or input expenses, it will fall on the contractor. Most of the parties do not know it, but the construction bookkeeping will bring it forth.
iii) Unit price:
A supervisor or worker for hire will charge a client at a fixed cost for each unit price. It is expected to utilize this charging strategy, particularly when organizations can’t assess the unit creation for the project with assurance.
Useful Tips in Construction Bookkeeping:
Construction bookkeeping can produce the desired results if it is done accurately. Who but bookkeeping experts can help your cause? Consider hiring them for the purpose. Following are a few useful tips for effective construction bookkeeping.
i) Record all details:
It is obvious that record-keeping is an essential aspect of bookkeeping. Keeping all the business and transaction receipts in construction projects is mandatory to keep accounts in order and fair. In addition to providing proof of cash inflow and outflow, transaction receipts can help you at the time of audit. Better keep records safe and accessible. A list of important things to keep in mind here is given here:
- Accounts payable
- Accounts receivables
- Job costs
ii) Use job costs:
Job costs can be used to manage project costs and business ledgers. Moreover, it also allows the supervisors to decide how much they should charge for the project. The process could be time-consuming if it is manual; however, using the software could save you some time. The main components of job costs are mentioned below:
- Overhead costs
- Labor costs
iii) Use multiple bank accounts:
Is it wise to keep all your cash in a single bank account? Probably not! A single bank account makes it harder to see how you are doing monetarily because all the cash in the financial balance may not really be yours. Some of it is probable held for things like finance, covering costs, and settling charges.
It is a point where having various bank accounts can help. You might have one record saved for paying costs, another for overseeing finance, and a third one for getting installments for customers.
iv) Automate your bookkeeping:
Automating your bookkeeping activities will bring numerous advantages to your construction project. From saving time and money to reducing human errors, the decision could produce fruitful results. You can opt for automating a few of your accounting activities or the entire system.
Streamline your Accounting Operations with Experts!
The accounting department in any company can play a vital role in business success. Overlooking these activities would be nothing less than tomfoolery. It is best to join hands with professional accounting firms to streamline your business operations.
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