Quick Tips: Construction Accounting
Robert Scherer, President of Plumb
Olivia Roemer, CCIFP, Sage Certified Consultant, Plumb
Keys to Accounting: There are a few keys to accounting that can help to provide an accurate and relevant accounting system, such as:
• KISS (Keep It Simple Stupid!)
• Cash is King
• Billings are Money
• Accounts Payable Process
• Payroll Processing
• Reconcile and Review
KISS (Keep It Simple Stupid)
There is no need to overcomplicate the process. If you don’t understand how it’s working, you won’t understand what it’s telling you. Keeping this in mind may also keep the cost to produce the information much more manageable.
Cash is King
Accounting for the money received and the money spent will accomplish the major portion of the process. Reconciling the bank account activity to the accounting records on a monthly basis will help to ensure that all cash activity has been captured.
• Great Tip – Start the construction job on the right foot – Try hand-delivering the first bill to your client, along with a box of chocolates. This will develop a good rapport and set a precedent with whoever processes the bills. Make sure all the paperwork and information is correct. This takes the accounting aspect and turns it into a more “people business”.
Remember: Bills that get collected = money received.
Billings are Money
Timely and accurate billing is the key step to creating cash. Billing should be done on a regular basis and the collection of those billings should be closely monitored.
Accounts Payable Process
Nobody likes to pay out money, however the worst part is paying bills you didn’t think you owed (like taxes). Payables that are not processed timely and accurately will result in: billings being processed late; planning and budgeting will be useless; unwanted surprises persist.
Determine how payroll time will be collected, whether manually, using a time card or electronically, using various mobile time collection technology. For accurate job costing, payroll must be entered with job and cost code detail. With this information, you will be able to run various labor production reports.
• Great Tip – Cost Codes – Don’t make them overcomplicated. Questions to ask: Is it telling you anything valuable? Does it make your company more competitive? Make the cost codes simple enough, so field personnel can relay the information, but robust enough, so management has enough information to make a good decision with the information you are providing them.
The proper use of change orders is important to job costing. Keeping your budgets up-to-date by entering changes to your scope of work (change orders) will help you analyze where you excel and/or where improvement is needed.
Reconcile and Review
Cash, investments, accounts receivable, accounts payable, credit card liabilities, and other significant balance sheet accounts should be reconciled to a third party statement on a monthly basis. The activity in these accounts and the overall financial statements should be reviewed on a monthly basis for reasonableness and used as a basis for planning and making business decisions.
Users of Financial Statements: Besides management, there are other people and organizations that request and/or review the financial statement of the company. For example:
• Surety Company
• Tax Agencies
Great Tip – Embrace your outside professionals – As your company experiences growth, make sure you deepen your relationship with your Banker or CPA, so everyone involved with your financial statements and reports are on the same page. Bonding Agents can be a good resource to share competitor comparisons, to see where you stand, as it relates to your industry Sign up for the next Construction Financial Management Course with Plumb and the AGC, San Diego Chapter.
Banking and Bonding Management
Wednesday, March 27th
11:30 – 1:30
$99 for AGC Members
$129 for Non-Members
Beyond the Numbers…
Plumb supports and strengthens your company’s accounting department and management with outsourced bookkeeping, controller and CFO services. Whether you are a CFO who could use a quality controller once a week, a controller who needs bookkeeping assistance, or an office manager looking for higher level finance and accounting oversight, Plumb can fill the need.