Money is so important in our lives that even kids learn about savings and ways to organize their money. Imagine now how relevant it is when we become adults, earn an income, and have bills to pay. Moreover, how about if we have a business? Do you think organizational skills will be needed? Absolutely!
Those small business owners who keep detailed financial records are better prepared to make well-informed decisions. Contractor accounting is required to keep track of how much money they owe to suppliers, how much their clients owe them, and how much they need for other expenses, which is only possible with efficient and organized construction bookkeeping.
Bookkeeping for contractors is essential to perform their job accurately. It requires business owners to enter transactions every day, for which it is necessary to have the discipline to ensure that no items are either forgotten or missed. Mistakes can cost a business a lot of money and cause highly important problems in financial matters, such as estimating job costs, paying bills, and receiving customer payments. So, the main question is “How do you do bookkeeping for a construction company efficiently and well-organized?”. Only basic accounting knowledge on taxes, loans, and other concepts might be needed to do your bookkeeping.
Check the following tips on accounting for contractors that will prevent several issues for you and your projects.
How Do You Do Bookkeeping for a Construction Company?
The first tip on bookkeeping for construction companies is to create a series of journals to record the daily transactions of the company, including separate journals for accounts payable, accounts receivable, job costs, and materials. You can create the journals using a word-processing program or an app for your construction company that can help you with staying organized. Using paper accounting journals from an office supply store is a good option too. Whichever option you choose, use different columns to enter the amount involved, a description of the transaction, and the date.
How Do You Do Bookkeeping for a Construction Company Using a Series of Journals?
Use the “accounts payable” journal to enter your company’s bills, which will include items such as rent, credit accounts, loans basic information, utilities, fuel, repairs and maintenance for vehicles, insurance, Worker’s Compensation, equipment, and other property. Remember to include the amount, method of payment, to whom the payment was made, and the date for each entry. Also, if the payment was made by check, remember to include its number.
Use the “accounts receivable” journal to record all payments from customers. Remember to register the customer’s name, the amount of the payment, the income with the date, and any balance still outstanding.
Finally, use the “job costs” journal to register expenses, which will include supply, material, and tool purchases, as well as payroll and subcontractor payments. Remember to enter these expenses with the amount, the name or number of the job for which the expense was made, a brief description of the payment made or item purchased, and the date.
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