It’s no secret: bookkeeping for construction businesses can be quite challenging. Construction companies tend to find themselves dealing with unstable work forces, wage rates which may fluctuate according to location, and multiple ongoing projects which can make bookkeeping cumbersome. 

But fret not – here are 5 top tips to make bookkeeping for your construction business more effective and manageable.

1. Keep personal and business finances separate

One of the first steps construction businesses can take is to keep a separate bank account just for the business. Simply approach your local bank to open a new account which fits your needs and that’s it. 

Setting it up is pretty easy too – just take your driver’s licence or passport, along with your business registration and license documents, and you’re done. 

2. Open several bank accounts

Tracking expenses and revenue can become easier if you have dedicated bank accounts for specific functions. For example, you could have one for payroll, one for customer payments, another one as a cash reserve, and so on. 

This will allow you to better track how much money is coming into the business each month.

Did you know that most modern digital banks here let you set up ‘spaces’ or ‘pots’, allowing you to divide off your bank account so that you can set spaces aside for paying wages, for example?

3. Do a little job costing

Construction accounting is always project-focused, so you need to be proactive and find a way to track, categorise and report transactions for every job – otherwise known as job costing – which is an effective way to allocate expenses and revenue to each job. This will provide accurate accounting in terms of profitability for every contract and help you prepare for tax time. 

Job costing or total job cost can be calculated by adding up direct labour, direct materials and applied overhead

There is software out there that can help you achieve this, although working with a financial accountant is a far better option. 

4. Hold on to the minor details

In the habit of discarding business receipts? Don’t! 

Receipts offer a proof of expense in case your company is ever audited and also provide insight into where all the money has been going. Also, as a golden rule: try not to pay for anything by cash because you can’t track it as easily. Instead, use cloud accounting tools to make things easier for yourself. For example, you can use Dext to take a photo of your business receipts. This way, you’ll never lose them as everything will be in your accounting system instead of having to store them and write everything down manually. 

5.  Reconcile your bank and supplier statements

As you get a monthly income and expenses report from your bank, you should reconcile your transactions to make sure that everything falls in line with your internal accounting system, payments, invoices etc. 

Our firm can help you set up your accounting system and manage your bookkeeping or VAT returns. This will free up more time for you to do what you do best, whilst also making it easy to get invoices out on time and take payments digitally on site when needed. 

Need help?

If you need help with your business, consider outsourcing your finances! Contact us to see how we can help you.

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