Succeeding in Construction: Better Keep the Books Current
In business, you want to save costs wherever you can. You may be managing your books yourself because you’re a sole proprietor, or feel hiring a bookkeeper isn’t worth the cost. However, shabby bookkeeping could end up costing you even more money, and with the high expenditures typical to Construction, even more so.
The DIY route is possible, but you need to invest your time in making your records clear and organized. Ultimately it will help you in the long run, either by helping you in planning your business’ future, or by saving you the headache of trying to fix errors later.
Here are some of the ways accurate bookkeeping can benefit your business:
Save on your taxes
Saving and organizing all your receipts allows you or your accountant to see what business purchases you’ve made in the past year and claim them as deductions on your tax return. Some expenses like a home office, electronics, phone and mileage that are vital to your business can help you save at tax time.
Make better-informed business decisions
Accurate bookkeeping affords you a clearer picture of your company’s financial viability. If you are able to track prior expenses and incomes, you can make quantitative decisions about where to grow or reduce your efforts. Easy access to records can let you know how much you paid for a service the last time you did business with a contractor, or which clients may no longer be worth the effort to retain.
Increase your financing options
If you need a loan, your lender will want to see your books to get a sense of your company’s viability. Outdated books could lead to get a smaller line of credit, worse terms or no loan at all.
Get your money faster
Without accurate records, you may lose track of when to invoice clients for your work. If you’re spending time trying to track down who owes you what, you’ll delay actually receiving that money.
Help an audit run smoothly
If you’re audited for your tax return and you’ve claimed the deductions noted above, the IRS would need to see the receipts. Without accurate records, the auditor may have to guess their worth. If your company receives grant funding, government funding or other outside funding you will need to be able to readily show proof of how that money was spent. If your bookkeeping is organized, the audit will go faster (which is what everyone wants from an audit).
Avoid interest and fees
Accurate records let you know how much to pay on your taxes. Don’t waste money by overpaying, and if you want to avoid penalties make sure not to underpay. Good bookkeeping also helps you stay on top of bill payments so you can avoid late fees.
Avoid payroll taxes
As with taxes, over- or under-paying employees is either a waste or a penalty. When January rolls around and W-2s are sent, an inaccurate W-2 could mean a big headache for both you and your employee.
Even with keeping things current, insufficient cost factoring could well be enough to catch you out. If price of timber soars, with your bottom line presupposing base prices, it could be enough to be left high and dry.
It is vital that at every level of project management there is
understanding of budget variance on projects, and this, at a minimum, must be understood by the project or construction manager. The comparison of project completion to budget expense will allow for immediate action to be taken to assure project profitability; without this a construction company operates blindly.
Author - by Robert Patin