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Accounting is a crucial process for any business, and construction is no exception. However, construction accounting is a particularly unique process thanks to the distinctive problems faced by construction companies. This can leave many construction companies confused about what accounting methods they need to use, and what standard accounting methods need to be altered to fit their business. Fortunately, it isn’t all that complicated once you get a handle on it.

What’s Different About Construction Accounting?

Though the basis of accounting for construction is the same as in other industries, there are many concepts specific to construction. Construction projects are typically large, one-time projects, so determining the proper costs is both more vital and more complicated than other industries. With so many factors going into the costs, it can be a hassle to document cash flow without proper planning and organization.

Fluctuating costs also make it more difficult to determine costs over a longer period of time. It’s often difficult to predict costs for a long-term job because of how much the prices can change over that period.


What You Should Know About Construction Accounting

Though accounting for construction can be specific and unique, it doesn’t have to be complicated. There are multiple ways to streamline your processes and ease your workload so that accounting can be a breeze!


Streamline Your Accounts Receivable Processes

Accounts receivable refers to the money owed to your business for goods or services sold–it’s essentially the money your clients have not yet paid. Keeping track of all these owed payments gets complicated, and it can eventually spiral out of control if your process isn’t optimized. Having a streamlined accounts receivable process will ensure that nothing is lost in your stockpile of unpaid invoices.

How can you streamline the process? The key is developing a clear, standard operating process. Figure out a step-by step, straightforward system to establish credit terms, create invoices, and send invoices. Then, clearly document that process so your entire business understands how it works. With a standard operating procedure, you and your employees will be able to go through the accounts receivable process seamlessly.

You may also want to consider automating your AR process. This is often time-consuming and costly to implement but may have big payoffs in the future. Automation isn’t for everyone, so be sure it’s the right move for your company before you implement it.


Start Job Costing

Job costing involves breaking operational costs down into specific projects. This is used for billing, estimating, and ensuring the company’s projects are all on-track.

Your costs typically fall into three categories: overhead, labour, and materials. With job costing, you will combine all these costs according to what project they fall under. This is a particularly helpful organizational method for construction companies, who work on individual and specified projects.


Use a Cash Flow Planner

Your cash flow is the bread and butter of your business. It’s obviously important to maintain a proper cash flow, but a cash flow planner is a great way to ensure that the flow remains stable over the coming weeks or months.

Cash flow planners are easy to make. Simply create a spreadsheet detailing your expected cash inflows and outflows within a given time, with your total cash forecast at the bottom. This spreadsheet can be altered to suit your business, and can be as simple or as complicated as you like. Your timeframe is also up to you. Decide whether you want to plan cash flow per week, per month, or even per year, depending on what works best for your company.


Learn More About Accounting for Construction Companies

Do you want to know more about how to do accounting for your construction company most effectively? Do you have questions about how it all works? Schwan & Associates is here to help. Contact us to start the conversation.

W’re here to help!



Jeff Schwan

Jeff established Schwan & Associates CPA to bring unique “cloud-based” accounting services to small and medium-sized Edmonton businesses. Inspired by the quality time spent with his family, Jeff’s goal is to put more time back in the hands of the busy entrepreneurs who strengthen Edmonton’s business community. With 10+ years of experience in diverse management roles, Jeff has acquired a strong set of leadership and mentoring skills. He is, and always has been, an educator at heart. He knows the value of spreading knowledge, investing in people, and continually learning.

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