Construction Business Management

Article

Accounting and Record Keeping

There is no function more critical to your success in the construction business than effective management of financial and other records. Only with good accounting and record-keeping policies and procedures can you achieve the following functions:

 

  • Select the information you need to monitor the performance of current and completed projects
  • Manage payables and receivables
  • Forecast cash needs
  • Improve your estimating function based on historical job cost
  • Tag the best-performing and non-performing employees
  • Identify unprofitable customers
  • Expose dishonesty
  • Comply with tax laws, while taking every advantage permitted by them
  • Provide information required by various government agencies
  • Know the financial status of your company at any given point in time
  • Archive records that will be required for various purposes in the future

Professional expertise such as that of a certified public accountant is required to design the most effective record keeping system for both corporate and tax purposes. Once the systems are in place they can be maintained by a competent in-house bookkeeper or bookkeeping staff and reviewed periodically by your CPA. Your outside CPA is a consultant to you and your bookkeeper, even if your bookkeeper is also a CPA.

The complex and changing nature of tax laws demands CPA oversight and input. Because construction accounting is unique you should seek out a CPA who has extensive experience in the construction field. Investigate his or her professional expertise and reputation and ask to speak with some clients. Consider his or her personality. Even the smartest CPA in town is not automatically a good fit for your company.

Your in-house bookkeeper is a key person in your firm. While knowledge and experience in construction bookkeeping are strong pluses, he or she needs a variety of organizational and management skills and attributes that range beyond strictly bookkeeping. These include:

 

  • Ability to learn new things quickly
  • Ability to see an overall picture as well as the details
  • Ability to organize
  • Interpersonal skills for dealing with one's own staff, company management, subcontractors, vendors, banks, etc.
  • Communication skills
  • Quest for excellence
  • Effectiveness under pressure

Future articles in this space will address other aspects of construction accounting and bookkeeping.


The author of this article, Nick Ganaway, was a successful general contractor for 25 years. He is a consultant in Atlanta, Georgia, for contractors and other small business owners. Nick has described how to set up and manage a construction business that is profitable, enjoyable, and enduring in his book, Construction Business Management: What Every Construction Contractor, Builder & Subcontractor Needs to Know.


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