Why Do I Need a Construction Bookkeeper for my Small Contractor Business?

Hiring a bookkeeper familiar with the unique financial and operational needs of construction companies is one of the best investments a small business owner could make. Why is this so?

Your construction business still benefits from many of the same bookkeeping services as other types of businesses. Services such as basic financial reports, sales tax and employer withholding tax filing and payroll. However, construction bookkeeping is generally a bit different than bookkeeping for other businesses. The difference is the amount of complexity found in these accounting services due to the business /operational model inherent to the construction industry.

Let’s examine one of the many accounting differences, then narrow the focus to look at budgets. Namely, budget planning for future equipment expenses. But first, here is a brief look at one accounting difference:

Calculating the ‘breakeven-point’

This is the point where total costs equal total revenue and the business neither makes a profit nor suffers a loss. Standard accounting practices are much

simpler because in most cases the business is a fixed establishment in which customers go to, or where goods are sent from. There are sales, costs of goods, expenses, etc. and with those a break-even point can be calculated quite simply.

With construction accounting, it’s crucial to keep track of costs from custom work in multiple locations. For a given construction job, costs may include packing and unpacking materials, traveling, warehousing, subcontracting labor and more.

On top of the mobile nature of construction work, sales can have multiple categories within it. Cost of goods includes direct and indirect costs, then there is a multitude of categories within each of those. Calculating the break-even point is more complicated in construction because much of the work is completely custom. Instead of a basic profit and loss report for a company, you need job costing and job profitability reports for each project. Failing to account for these unique expenses and profits for each job makes it difficult for a business owner to understand which types of projects to target or ignore in the future.

ANR Bookkeeping understands the nuances of construction business processes and offers account services for a wide range of construction and specialty professionals.

Planning a Budget for Future Equipment

All small businesses should watch where their money comes and goes. Budgeting expenses, though a tedious and tiresome chore, is essential to ensuring your business can make ends meet. One of the main expenses for every small business is purchasing equipment and is especially true for a construction business that relies on heavy machines. Having an equipment budget will also help you with job and labor costs.

First, understand what is considered equipment. Generally, anything that is needed to operate your business and will retain its value over time, such as:

· Large vehicles

· Construction equipment

· Communication systems

· Computers

Note: Office supplies, small tools and other like items would be considered a ‘general budget’ item.

There is no definitive amount of how much you should allocate to your equipment budget. This depends on the size, location, and specialty of your construction business. There are two common sense steps to take that will help with deciding:

1. Make a detailed list of all equipment your business needs. This may seem obvious, but hidden costs can be found here.

2. Contact suppliers to get quotes for each piece of equipment you need.

This step may help with the ‘lease or buy’ decision process which is another accounting matter in itself.

A budget is a forecast of expected expenses, so it should include more than a business needs at this moment. Account for the equipment you will likely need in the future.

Lastly, account for the for the costs of running the equipment, its maintenance, and repairs. These may be figured into the job and labor costs, but it is important to know these costs before financing/purchasing the equipment.

Make room in your business plan for a professional bookkeeper who can provide specific services for the small business owner in the construction industry.

Successful small business management requires careful and efficient financial management. This describes ANR Bookkeeping Services at its best.

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