Many construction company owners lack the budget or interest in hiring a full-time accountant. They don’t want to carry the associated payroll costs or the responsibility of managing one more person. They’ve got enough on their plates managing their clients, jobs, vendors and crews.
Yet construction company owners who don’t have a construction-savvy accountant are missing out. An outsourced accountant can provide a much needed skillset while being budget-friendly because they are not full-time and don’t require benefits that employees do.
Construction accounting entails far more than billing customers and paying bills. To manage the construction company well, owners need an accurate job cost and billing system and work-in-progress report. They may also be subject to prevailing wage reporting and other unique requirements of the construction industry. When construction accounting is done well, owners gain better insight into their financial data and save money by avoiding costly mistakes or taking advantage of opportunities. Bankers and sureties gain more confidence in the construction company when they are provided with accurate and timely reports.
Construction Accounting is Complex
The profitability of each contract should be tracked separately. Skilled construction accountants establish the means to track necessary details within the accounting software. Accurate recording allows owners to track the progress on each job, identify change orders or cost overruns, provide points of reference for future bids, and provide a basis for forecasting. This input proves invaluable for the financial management of the construction company.
Skilled accountants also help manage cash flow effectively. They stay current on customer billings and ensure timely payment. They also keep the owners apprised of their cash positions with enough lead time to take action and avoid cash flow problems.
Construction accountants ensure compliance with construction specific rules and regulations. They know the ins and outs of prevailing wage laws, workers comp, sales and income tax regulations which, if done incorrectly, could incur significant legal and financial exposure.
Accountants help strengthen relationships with bankers and sureties by providing timely, trustworthy financial statements and disclosures. They’re also available to provide detailed schedules to back-up the reported figures or answer questions. This support instills confidence in the numbers as well as the processes used to manage the firm’s financial affairs. When bankers and sureties lack confidence in the data, they will generally not provide as much credit as they otherwise could when underwriting a line of credit or an upcoming project bond. Lack of credit may compromise the contractor’s ability to grow and prosper.
Your outsourced construction accountant should have the right credentials and experience to provide all of the services you’ll need to manage your business effectively. Your CPA could serve as a resource to source candidates, interview prospects and/or conduct background checks. In addition, your finalists should provide references who can attest to their competency and value to the companies they serve.
It’s money well spent.