Construction businesses have lots of moving parts- creating bids, estimating, invoicing change orders, purchase orders, payroll, managing field work, managing employees, managing customers, back office, paperwork, insurance, bonding and the list is endless.
But all being said finances and what you are left with in your bank account after taking so much risk and doing so much of hard-work matters the most. Construction businesses unlike other businesses do not have a hand to hand transactions and that creates a big cashflow issues apart from labor and materials cost. So running a profitable construction business should be one of the key factors that the business owner should focus on.
For most contractors, financial reporting starts at the job level. Each job’s financial status directly impacts the contractor’s overall financial statements. As accountants and bookkeepers we have the expertise to design and implement the project level reporting processes and controls to keep you informed of each job’s progress and where it is headed. Having a strong accounting setup can give you clear picture of the company performance from the perspective of
Gross profit by job
Cash flow by job
Over/ under billing by job
Backlog schedule
Percentage completion / work in process
Backlog forecast
Other ad-hoc reports
Not having a well managed accounting and bookkeeping system not only makes the business owner run the business in a blind sighted way but could run into cashflow issues.
Cash flow is what every business needs to survive and thrive. Cash management is at the heart of a company’s overall effort to increase profitability. For many businesses, the key to success is the management of the company’s cash flow.
Unique aspects of the construction industry make it challenging to manage cash. Construction is cyclical and project based. Most contractors have to contend with retainage payments and wait long periods to receive payment, while they are paying certain project costs, payroll and overhead expenses up front. The multiple relationships between owner, contractor and subcontractor also tend to complicate the cash management process. The most successful contractors know where their cash is on a daily basis and are focused on the cash flow cycle.
Surety bond is the lifeblood of contractors, ensuring they have the financial backing needed to undertake and complete projects successfully. Surety companies require assurance that they are extending credit to contractors who have a proven track record of completing projects successfully and provide timely, quality financial information and internal management reports. In order to increase bond capacity or getting a line of credit managing financials is crucial for construction businesses.
If you are a commercial contractor your bookkeeping needs to be on-point.
Accurate Balance Sheet and Profit and Loss Statements
Detailed financial forecasts, cash flow projections, and work in process schedules, essential for bonding meetings.
Need help with internal accounting and reporting that make sense? Schedule a one on one call
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