Essential Bookkeeping Tips for General Contractors: Tools, Software, and Best Practices

They’re only required to use the percentage of completion method for construction contracts that extend over two years. Contract Revenue Recognition – The generation of revenue in the construction business follows extended payment terms. In most cases, there is a wide time gap between the completion of a project and the income generated from it. Various methods are used to determine when an income is to be recorded in relation to expenses and other liabilities. This is called income recognition in construction accounting parlance. We specialize in reducing taxes and perfecting financials for builders, contractors, and construction businesses, ensuring scalability and profitability.

QuickBooks for Construction

Manage employees with a built-in time clock and store photos, videos and documents in the system for easy access. The first is the Essential plan starting at $199  for the first month, which then moves up to $499 per month. The Advanced plan starts at $499 for the first months, then increases to $799 per month. The Complete plan virtual accountant starts off at $799 for the first month, then goes up to $1,099 per month after that. Features, such as timecards, can be synced automatically while working remotely so that nothing slips through the cracks.

Integration with Other Software

Weekly reports, monthly calls, customer service… They are a true partner. This video shows you how we onboard a new client company and how we transform their books into a precision construction accounting system. Most users report having an easy time navigating and using the Foundation software for their usual needs. Some people need help learning to use its more advanced features, though Foundation offers a highly-rated customer service line for assistance. Essentially, this ASU improves disclosure requirements, prompting more useful information out of financial statements.

Why Accurate Bookkeeping Matters

To record a construction cost, debit the construction in the process column and credit the cash column. Construction companies should use a percentage-of-completion method that recognizes both revenue and expenses as they are accumulated over time. It aligns with the project completion ratio and most lenders or guarantors require this.

How do you record construction expenses?

• Instead, try pricing jobs with a markup that doesn’t include overhead.
• If a construction business fails to track income and expenses, materials can’t be ordered, paid for, and their delivery ensured.
• You can invoice clients and make payments directly from the app and monitor the budget to make sure you stay on track.
• The firm specializes in preparing personal and corporate taxation while providing fractional CFO work and leading the accounting and finance function for several small-to-medium-sized businesses.
• You’ll have the support you need to unlock the power of your construction management software system.

In his free time, you’ll find Jason on the basketball court, travelling, and spending quality time with family. When searching, try to strike a balance between user-friendliness and functionality. If you’re looking for the perfect middle ground, we recommend FreshBooks accounting software for construction. “We chose Foundation for its array of features, depth of reports, its customization options, and its affordability. Much cheaper than buying software that you have to pay per-user access fees for. There are quirks, but once you understand the system, it’s generally easy to navigate and manage them.

Construction business billing methods

By leveraging tools like QuickBooks Desktop Contractor Edition and Sage 100 Contractor, you can streamline your financial management processes. Integrating these tools with project management and CRM systems further enhances efficiency and accuracy. Regular audits and timely updates ensure your records remain precise and useful for decision-making. Investing in training for your staff can significantly reduce errors and boost productivity. Ultimately, meticulous bookkeeping practices empower you to manage cash flow effectively and make informed decisions for your contracting business. Effective bookkeeping is a critical component of a successful general contracting business.

Features

Under regular business accounting circumstances, revenue recognition is simple because they sell a product or service and collect a fixed price right away. They can choose between the cash method or the accrual accounting methods. However, the nature of construction companies makes how these businesses recognize revenue more complicated. It essentially ensures that your service price covers all overhead expenses and helps ensure you make a profit on all of your construction projects. Job costing is a method for allocating expenses and revenue to each specific job. Not only will this help you prepare for tax time, but it provides an accurate accounting of profitability for each contract.

Since this is the bread and butter of a contracting business, let’s go accounting into more detail. This method allows contractors to accurately bill their clients for the work they have completed rather than charging them a lump sum fee. This ensures that expenses are easy to identify and don’t get confused with personal expenses. It establishes a “paper trail” for times when needed (for instance, an IRS audit) and can insulate against creditors if the business stumbles. Finally, you want to find a solution that you can customize if you have special reporting or processing needs. This may be relevant for larger companies that have multiple projects that they manage simultaneously and need to create comprehensive reports and cash flow data for stakeholders.

Pay Estimated Taxes

Some programs, like one from The Neat Company, enable electronic payment directly through its invoicing function, which then makes it easy to collect on invoices by checking their aging. It can even provide insights into top expenses and budget variations that can help maximize cash flow or enable business growth. As a general contractor, your primary focus is on delivering exceptional bookkeeping for general contractors construction projects to your clients.