Accounting is vitally necessary to the success of a business that deals with concurrent projects and contracts.
It is also important to hire an accountant who knows and understands your industry-speak and unique requirements.
This is especially true for construction companies.
Equipment and vehicles must be accounted for, whether they are fixed assets or not. Invoicing and vendor payments must be properly managed. There are special costs related to the construction process including materials, labor costs, consultants, and management expenses. Costs must be charged to the correct contract and categorized as direct costs, indirect costs, or selling costs.
Then there are unique revenue recognition rules for contracts in progress. An experienced construction accountant, like the ones at Sherman Oaks Accounting & Bookkeeping powered by One Source Services Inc., will be well versed in all of this, including the Percentage of Completion Method for recognizing revenue and using metrics like revenue per employee, plus general profitability and financial management processes.
For companies such as construction, remodeling, landscaping, and design businesses who fulfill service orders over a period of time, it’s crucial to monitor job costing. Job costing tracks a project’s expenses against the revenue produced. In a nutshell, it will tell you the profitability of each job. By knowing which jobs are profitable and which are not, you can investigate which factors affected these outcomes and take action to engage in the jobs you want in the future. The experienced construction accountants at Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. are job-costing masters.
Customer estimates against actual job costs is another important number for construction companies to measure. A QuickBooks Online budget versus actual report can show this. A Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. accountant will first create a budget for each job subdivided for a particular customer and job (each budget will be created from scratch) and then enter the estimated income and costs for the particular job. Next, they will run the budget versus actual. The accountant can even change the report name to estimate versus actual, if you like.
Setting budgets is extremely important for project-based businesses with lots of expenses, like construction companies. Budgets can be used for different purposes: forecasting future profitability, tracking expected departmental performance, or comparing a job’s estimate to actual, to name a few.
A budget is a financial plan and having a good plan greatly increases a company’s chance of success. A good budget puts a business owner in control of the direction their business is going by giving them tools to measure progress. Assisting with budget development is another way that a specialized accountant can provide value, especially one who is a trusted QuickBooks Pro Advisor like the accountants at Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc..
However, establishing budgets and recording transactions aren’t enough. There is one more step: you need to look at reports.
There are two types of budget reports: the budget overview summarizes budgeted amounts for a specific budget, and budget versus actual summarizes budgeted amounts versus actual amounts and their variances in variance percentages.
A Sherman Oaks Accounting & Bookkeeping powered by One Source Services, Inc. accountant who specializes in construction will create these reports for you, carefully analyze them and then help make the data understandable.