Featured Image Caption: Construction Accounting Bookkeeping
Bookkeeping for contractors of construction companies is unique and different from other industries. Bookkeeping allows these contractors to keep records of their short- and long-term income as well as expenses. When coupled with the free tax tools available, it also allows them to understand their financial situation. As a contractor, you need to invest your money in multiple fields. You need to hire construction machinery, labor, and other resources for your project.
Apart from that, you need to pay the fees to the engineers. So along with the payouts of your employees, you must invest your project funds in different areas. In this regard, you need to hire a bookkeeper to keep the records of your financial transactions.
Importance of Bookkeeping for Contractors of Construction Industry:
Construction is one of the most complicated industries. It involves large number of workforce and equipment in single project. If the company is dealing in multiple construction projects, then managing the track record of expenses and revenues become even more complicated.
Mentioned below are the reasons that make bookkeeping for contractors essential:
- Bookkeeping allows to keep a record of revenue and expenses accurately.
- It allows the contractors to stick to given budgets. You can divide your fund in different sectors, and you can tell your accountant to manage the same.
- It allows the contractors to manage the projects effectively.
- In construction industry every project is different. If you have multiple projects, then you need to shift your machines from one site to another and you must track the transportation cost. If you move across state borders, you are required to pay additional taxes. In this case, bookkeeping for contractors is essential. Your accountant can keep a track record of all your expenses.
- In construction there are two types of costs, direct and indirect. Direct costs include material, equipment, or labours. While indirect costs include insurance, repairs, etc. To better understand the nature of costs of construction business, you must keep the records of all your expenses.
- Construction may take months and years to complete. Therefore, you need to work with the vendors for longer period and you need to pay them accordingly. Thus, bookkeeping makes it easy for contractors to keep the records of balance and cleared payments.
- Construction industry is influenced by weather, economic fluctuations, and politics. Sometimes the prices of material and labour may go way to high. The cost of project differs according to the weather as well. Thus, bookkeeping allows you to keep a track record of all the changes in costs that occur.
- In construction industry cost of same workers and equipment may vary from project to project. The workers in construction industry are paid on an hourly basis, and this amount is determined by the regulatory bodies or labour department of states or locality. It is also known as prevailing wages. Payment of workers also depends on the travel pay, taxes and union rates. Thus, to calculate each worker’s payroll effectively, bookkeeping for contractors is essential.
- The profit and loss of construction industry determines the livelihood of contractors. Profit and loss may vary in every project. Calculation of cost and revenue is also exceedingly difficult in construction industry because there are hundreds of expenses. Thus, to keep record of each expense and being organised is essential to calculate the revenue accurately.
Laws of payments and taxes differ from state to state, and they may change from time to time. Bookkeeping allows you to follow the laws accurately. It ensures to eliminate the mistakes that may otherwise be caused in the calculation of taxes and payments.
By Kiera Peterson
who is residing in Australia.