1. Choose a Service with Construction Accounting Expertise
One of the most important steps in outsourcing your
construction accounting is selecting a provider with specialized knowledge and
experience in the industry. Construction accounting is vastly different from
general accounting because it involves dealing with job-specific costs, revenue
recognition based on progress, and understanding the nuances of contracts.
When searching for outsourced accounting services, make sure
to choose a firm that understands construction bookkeeping. This includes
familiarity with concepts such as:
Job Costing: Tracking all
the direct and indirect costs associated with specific projects.
Work in Progress (WIP) Reporting:
Regularly updating stakeholders on the financial status of each job.
Contract Revenue Recognition: Recognizing
revenue as jobs are completed, which is crucial for compliance with accounting
standards such as ASC 606.
Retainage: Managing the
portion of the payment that is held back until project completion.
By selecting an outsourced accounting service with expertise
in these areas, you’ll have peace of mind knowing that your books will be
handled correctly, enabling you to focus on your business growth.
2. Leverage Real-Time Reporting and Analytics
One of the key advantages of outsourced construction
bookkeeping is the ability to access real-time financial data and reports.
Construction companies often need up-to-the-minute information on project
budgets, cash flow, and job performance. By partnering with an outsourced
accounting firm, you gain access to advanced accounting software and tools that
provide detailed, real-time reporting.
For instance, real-time job costing allows construction
companies to compare estimated costs versus actual costs as the project
progresses. With accurate and timely data, you can adjust project plans to stay
on budget and avoid costly overruns.
Analytics tools provided by outsourced
accounting services can help construction companies identify trends,
project profitability, and potential financial risks. With easy-to-digest
financial dashboards and customized reports, company owners and managers can
make more informed decisions and avoid reactive measures that may lead to
financial strain.
By using real-time data, construction firms can enhance
their decision-making process, improve profitability, and better manage cash
flow—elements critical to staying competitive in the industry.
3. Optimize Tax Planning and Compliance
Tax laws and regulations for the construction industry are
complex and vary by location. Compliance with state and federal tax codes is
critical, as mistakes can lead to hefty fines, audits, or legal issues.
Outsourcing construction accounting can help your company stay on top of these
tax requirements, as experienced accountants are well-versed in the tax
regulations specific to the construction sector.
Some tax issues specific to the construction industry include:
Tax Deductions for Job Costs:
Knowing what materials and labour can be deducted as job costs.
Depreciation of Equipment:
Construction companies often invest heavily in machinery and equipment, which
need to be properly depreciated to maximize tax savings.
State-Specific Sales Taxes:
Construction projects may be subject to different sales tax rates depending on
the location and type of work being performed.
Managing Retainage for Tax
Purposes: Retainage payments, which are held back until the completion
of a project, have unique tax implications that need careful accounting.
By working with an outsourced accounting service, your
construction company can minimize its tax liability through strategic planning,
ensuring compliance while taking advantage of all available deductions.
4. Reduce Overhead and Increase Profitability
Hiring an in-house accounting team can be costly, especially
for small and mid-sized construction companies. When you outsource your
construction accounting, you can significantly reduce overhead costs associated
with salaries, benefits, office space, and training for in-house staff.
Outsourced accounting services offer scalable solutions,
meaning you only pay for the services you need. This is particularly beneficial
for construction companies, where accounting needs can fluctuate based on
project volume and seasonality. You won’t have to worry about paying for
full-time accounting staff during slower periods, and you can scale up services
when your business grows or during high-demand periods.
