Construction company accounting is unlike "traditional" methods that focus on short-term or annual revenue cycles. Because so many projects run for longer than one year and take place on the client's property, there are dozens of unique accounting and record-keeping factors that come into play. For example, Construction company bookkeeping is project-based, which means all expenses must be traced back to a specific project or to the company's general operations.

Likewise, construction company tax planning has to use a project-based perspective, or else it's impossible to establish and achieve goals. Many contractors seek out a construction company CFO advisory service to deal with the multitude of special reporting requirements in a job-based accounting environment. Even for construction industry professionals, it's essential to understand the critical ways in which contractor accounting, tax planning, and bookkeeping differ from more traditional ways of doing business.

What's Different About Construction Accounting?

Contractors know their profession inside and out. What they might not realize is that there are three critical ways in which their industry differs from most others. Those unique aspects of construction accounting are:

  • It's based on projects, not profit centers: Unlike a typical retail seller or a similar company, construction entities need to use an accounting system that is entirely based on specific projects. Often, a given project might run for several years and include thousands of different sub-categories of expenses. Standard, four-quarter revenue cycles don't match up neatly with the way construction companies like yours s do business.
  • Labor, production, and billing, just to name three major categories, must be set up and tagged to designated projects. Things like site materials, unique labor situations, and material costs for a job have to be recorded accurately and applied to whatever job associated. The project-based aspect of construction accounting is the primary feature that sets it apart from all other types of financial record-keeping in the business world.
  • Production is completely decentralized: In addition to lengthy, seasonal cycles of production in the construction industry, most of a company's production takes place on the job site, not in a plant.
  • This decentralized kind of production means that accounting systems have to handle inventory differently than in a traditional environment. Additionally, the unpredictable nature of labor expenses and materials over a long period of time throws another wrench into the works. Standard accounting methods just won't suffice in the construction industry.
  • Contracts tend to be long-term: It's common for a construction contract to last several years and include complex payment streams within a single project. Traditional accounting methods and standard financial reporting software systems aren't capable of dealing with this unique aspect of the construction trade. The central issue is revenue recognition, especially on multi-year contracts that include extended payments and all kinds of special arrangements.

Covering All the Bases

We at Fusion CPA handle construction company accounting jobs of all sizes and even act as a construction company CFO business advisory if you need that level of assistance. Project-based, construction company bookkeeping and related tasks can mean keeping industry-compliant records as well as detailed tax documents on every job. Only about 15 percent of all businesses use this special kind of job-based system. That means you need to make sure that your construction company financial adviser has expertise in this area. Fortunately, our team is here to help in this area. We offer construction company accounting technology implementation and software evaluations to help evolve your operations. In addition to helping you profit from software, we can help you identify unique financial opportunities for revenue growth. We also offer comprehensive tax planning, bookkeeping, and CFO business advisory. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!


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