Bookkeeping can be a difficult, tedious task in just about any type of industry, and construction is certainly no different in that regard. While many aspects of bookkeeping for construction companies are similar to bookkeeping for companies in other industries, there are also some unique aspects of construction bookkeeping that require a little bit of industry knowledge.
Here are a few examples of some of the mistakes most commonly made in construction bookkeeping that you should do your best to avoid:
Trying to do too much yourself: If you are the owner of a construction company, you’re probably trying to stay on top of multiple projects at once, while also staying up to date with all the costs of labor for each of those projects. The more tasks you pile on your plate, though, the more difficult it’s going to be to do them all diligently. You have enough to worry about without also having to keep track of your financial expenses. This is the biggest reason why working with a third-party bookkeeper is so beneficial—it allows you to return your focus to other, more important areas of your company.
Trying to do bookkeeping with pen and paper: Yes, believe it or not, there are still a lot of business owners that try to do bookkeeping by hand, or with simple Excel spreadsheets. This is just asking for disaster, and is especially complicated for construction contractors—you’re on job sites for extended periods of time, and don’t have the ability to keep up to date with your expenses and invoicing. Having a third-party bookkeeper, or at least a good accounting software, is going to be a lifesaver.
Not focusing on your business’s needs: You should never feel like you have to fully neglect your business juts so you can take care of your clients. Ultimately, the success of your business and its long-term health come first. This might mean you have to turn down a project every now and then so you can instead invest in your company by paying off debts or replacing old equipment.
Employing too many people: You probably don’t have the luxury of having a large number of employees on staff. Therefore, it’s important to focus on running as lean an operation as possible. The more people you have on staff, the more likely it is you’ll either have people who just aren’t necessary for your operation, or are somehow incompetent. In either situation, these people drain your operating budget and cash flow. If you absolutely need some assistance with some of the required services associated with your business, outsourcing is your best friend.
Not making bookkeeping a priority: Too many companies simply do not prioritize bookkeeping and financial planning like they should. This is asking for trouble when it comes to your cash flow and financial health. It is especially true in construction—cash flow is crucial for business, and you must do everything you can to stay financially healthy as a company.
For more information about some of the most common construction bookkeeping mistakes and how to avoid them, contact us today at Patin and Associates.