Every bookkeeping needs to be filtered in your construction company, and input with a clear understanding of money in and money out. Some transactions will need to be split into parts. For example, a loan payment may have the amount of the money assigned to Principle and the rest to Interest.
Bank feeds and downloading from the bank works great for roughly 80% of the businesses, and the other 20%, like in Construction - causes major disasters which will go unnoticed until the contractor wakes up in a panic and asks the all-important question every contractor asks:
"I need to know where I am making and losing money. And I need to know RIGHT NOW".
Bank feeds and bank downloads are something the banks hate because of all the technical support and angry customers they have to deal with after the disaster hits. They offer it anyway to satisfy their customers and hope the fallout is not too terrible.
Most of the time, every transaction is dumped into a random account in the Chart of Accounts. The first time you downloaded a purchase from Home Depot, it went into "Material," the next time it was a "Tool," the next time it was office supplies and went into "Material," the next time...who knows where the wild goose goes?
Tax preparation folks love bank downloads, and bank feeds because it makes their job easy, and if you get audited or pay more income tax than you should, oh well.
Downloading from the bank is easy and saves time; however, it does not allocate the transactions for accurate Job Costing Reports.
The two main reasons highly profitable construction contractors use Job Costing Reports:
- It is the foundation of your construction company's unique "Job Costing Library." It helps you estimate new projects using historical data.
- It is part of your Business Process Management Process that can help you understand when, where, how, why, and whom you make and lose money.
Final thoughts
We have worked with many construction business owners who were struggling with Job Costing. We can either do it all for you, which in most cases, faster and cheaper than doing it yourself, learn by taking one or both of our Job Costing online classes: "What is Job Costing For Construction Contractors?" and "Ultimate Job Costing Solution For Contractors." Or, better yet, reach out to me and let me know the bookkeeping challenges you have so we can work out a solution for you and your construction business.
We can help a little or a lot depending on your needs.
About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or email sharie@fasteasyaccounting.com.