Construction accounting differs from typical accounting practices in that rather than keeping track of a company’s overall finances, construction accounting is used to track specific projects; to make sure they remain within budget, and therefore profitable. This can be very difficult, with constantly changing variables, unforeseen expenses and delays due to weather and more. Construction bookkeeping software such as QuickBooks makes it easier to keep track of these changes.
Construction accounting begins with job costing. The accountant must identify all of the costs involved in the project, and then allow an additional percentage of the overall cost as a buffer, to cover unanticipated expenses. This percentage may be small or it may be significant, depending on the risks involved and the volatility of market prices for materials. Three important aspects of good construction bookkeeping software like QuickBooks are that it will allow you to:
1. Check profitability. As the job progresses, you will be able to create current, regular construction bookkeeping reports to keep track of whether or not the expenses are remaining within the specified buffer amount. Doing this will ensure that you know whether the project will bring in a profit even before it is finished.
2. Give bid feedback. Your QuickBooks report provides a record of the project, allowing you to analyze the profitability in each step of the project as well as provide feedback for use in future job costing efforts.
3. Identify weak and strong points. You will be able to easily determine, from your construction bookkeeping, which specific phases of construction were more or less profitable, identifying problems that need to be addressed and pointing out strong points that can be exploited in future jobs.
So many variables go into construction accounting, including shifting budgets, equipment damage and bad weather, that keeping track of it all may seem a daunting task. However, with the right software and training, even these rapidly changing factors can be managed in time to ensure the profitability of every project.
