Published on November 11th, 2019 | by Sunit Nandi0
Reasons Your Company Needs Professional Construction Bookkeeping Services
Construction companies are in demand because more structures are needed to meet the growing population. Your company may be an expert in small renovations, general construction, build and own, real estate development, package building, and many more.
With a large amount of work, you cannot divide yourself to do all the work. That’s why it’s necessary to delegate each task to other people. With such types of work, a lot of money comes in and out of your company. What’s more, large amounts of money are usually involved in each project.
So you must hire a professional bookkeeper to record and manage your finances. Doing so will help you avoid overdue taxes, unregulated cash flow, and other financial issues. Before getting into more reasons why you should hire professional bookkeeping services, let’s clarify what bookkeeping means.
What Is Bookkeeping?
Bookkeeping is the process of regularly recording your financial transactions. Meanwhile, Construction Bookkeeping consists of managing financial transactions of construction businesses. A bookkeeper is someone you need for such a task, as they have the knowledge and ability to manage your bookkeeping concerns.
If you think that bookkeeping services are an easy task, then you should think again. Especially with construction businesses, a bookkeeper handles and manages more than one journal or account. You may have heard about some of these things, but bookkeeping encompasses the following bookkeeping accounts:
- Retained Earnings – This account is the record of the reinvested construction companies’ profits into the business.
- Owners Equity – It’s a record of how much the owner has after subtracting all the liabilities.
- Payroll Expenses – One of the accounts that must contain accurate data. It consists of your employees’ information, payroll taxes, income taxes, and other money involved in your employees.
- Purchases – These include construction goods or materials you bought for your business.
- Sales – This refers to all the revenue from your construction services.
- Loans – A loan is money you’ve borrowed to sustain your business, such as construction equipment or vehicles. Included here are the dues and loan payments you’ve made.
- Inventory – This is not only about counting your companies’ money but all the unused construction materials that will be used to deliver your construction services are listed as part of your inventory.
- Accounts Receivable – Especially for real estates, this account records customer dues that you must collect.
- Cash – This has two journals known as the cash disbursement and cash receipts. In here, all business transactions are recorded. Cash disbursement refers to the company’s periodic payments. On the other hand, if a client pays the company in exchange for its services or products, then it’s called a cash receipt.
Why You Should Hire Professional Construction Bookkeeping Services
Being a construction company owner may not allow you to handle all your financial transactions because doing so needs focus and time. Instead of wasting your time understanding how to keep track of all your finances, hiring a professional to do the job is most beneficial.
Aside from focusing on getting more clients, dealing with business projects, and overseeing your construction projects, you need to hire bookkeeping services for the following reasons:
1. Budget Wisely
Since bookkeeping services organize your expenses and income, it’s easier for you to draft your construction company’s budget. With a budget, you can anticipate what your company needs when it comes to finances. Thus, hiring a professional bookkeeper can help plan a fiscal budget by doing the following:
- Record and assess what construction services give you more earnings. It’s done by tracking and presenting factual financial data on the companies’ expenses and profits. Thus, you may avoid funding services that give you less income.
- Choose the best financing opportunities or loans that may help in your company’s financial planning. Since bookkeepers are knowledgeable about different types of loans, they can give you an outline of the benefits and disadvantages of the loans you want to avail. Or they can give you a financial review on how viable your investment in buildings or other construction projects is.
- Use their knowledge on laws governing businesses to benefit your financial plans. Since they understand how tax codes change, they’ll suggest what specific materials to buy. These are construction materials and equipment that qualify for tax write-offs.
- Make a plan based on depreciation budget. Aside from the law, bookkeepers are also aware of how much equipment loses its value over time. So, bookkeeping services assist you in buying the type of equipment or facilities that don’t depreciate quickly.
2. Stay Organized
A bookkeeping system can organize your company’s finances. By recording your daily transactions, they keep your financial records organized.
Keeping all the journals or accounts all by yourself is quite hard as your focus is not wholly on it. It’s because you need to take care of how you run your business and more. But with bookkeeping services, you won’t have to worry about your financial records because professional bookkeepers can do the following:
- Follow Standards – whether you’re a startup or big construction company, the law requires you to keep your financial records properly. Hence, bookkeeping services follow the set standards of recording all your financial transactions. Based on the types of accounts, they maintain their record by entering what’s only necessary or relevant on each account.
- Find Data Quickly – since they’re hands-on with recording and keeping your financial transactions, they can easily give you financial data you request. For instance, if you want to know how much your new construction project is spending, they can provide you the relevant data. Moreover, when the IRS or other tax-related government agencies request to check on your financial transactions, they can quickly provide the records.
- Keep or Discard Paperwork – bookkeeping services are also responsible for keeping or discarding your companies’ data, especially when it comes to employee records. Depending on the state you’re in, the law sets a minimum of years before disposing your records. Your bookkeeping services will see to it that you follow the required years so you won’t be penalized. Also, they know what records are past the required minimum years so they can make room for incoming papers.
3. Get More Investors
After some time, you’ll need to invest in more construction projects bigger than your previous ones. However, you may need more financial help from loan companies or investors. One way to attract more investors is to show them your financial statements.
Bookkeeping services can help you in presenting your financial statements since they already organized your financial transactions. Your financial statements will have the most vital part of convincing your target investors. Moreover, your financial statements should be detailed, grouped, and complete containing the following which bookkeeping services prepare:
- Personal Investment – before you can convince an investor, they want to see what equity investment have you contributed. They’ll know how much you want to protect and nurture your business if they know that you’ve investments in it, too.
- Break-even Point – this pertains to a specific profit target that should cover your liabilities. Thus, bookkeeping services can help you draft this so your investors can check whether they’ll gain profit.
- Cash Flow – you must present how much cash flow you’ve got in your business bank account. Cash flow is what’s left after expenses have been subtracted. Bookkeeping services will help you by presenting your monthly expenses that you can use as a benchmark.
- Margins – even if your construction projects are creating sales, it’s also vital to show your investors’ profit margins. These are revenues that come higher than your expenses. If investors see that you’re gaining, they’ll also see themselves getting returns.
- Sales – you must present a remarkable project proposal to your investors by showing them previous sales on related projects. If they see that your projects have growing sales, the more likely they’ll invest in your project.
4. Pay Tax Accordingly
Running your construction business also requires paying taxes, not beyond their due dates. Most companies pay their obligations late because they’re not familiar with the law. Then if the due date comes, they’ll find it challenging to present the needed data and records for basis. Or worse, they don’t have records and data to present.
As a result, you may face lawsuits or penalties. However, you can prevent this from happening when you hire bookkeeping services for your construction company. Then you can fulfill the following with their bookkeeping services:
- Tax obligations – you’ll only have an accurate tax return when you have all the necessary documents like incomings and outgoings and financial records. If you underpay, you’ll incur interests of the amount you haven’t paid. You may also overpay with incorrect returns, which could affect your cash flow. Also, tax obligations don’t come once a year as you also need to pay value-added taxes. With bookkeeping services, all of these obligations are taken care of.
- Maintain Business Records – paying your taxes doesn’t end there. You must also keep all records of your paid taxes for complying with your legal obligations. Moreover, keeping your records on these matters will avoid discrepancies that may occur if documents are lost. As such, bookkeeping services also see to it that these records are well-maintained for future use.
Choosing The Right Bookkeeper For Your Construction Company
The reasons mentioned will help you understand how bookkeeping services can help your business. The benefits you get are more than enough of the price you’ll pay for their services. But to maximize your investment with their services, you must hire the right bookkeeping services.
However, you shouldn’t hire someone who only has a general knowledge of keeping financial records. Instead, pick bookkeeping professionals who are well-versed with financial transactions of a construction company. By doing so, you won’t worry whether they’re doing the job right when recording your business finances.
You can use the following criteria to find the most appropriate service to manage your financial transactions:
- Skills – one of the essential requirements of a bookkeeper is to have the proper qualifications. You’ll know whether they can do the job if they have the following certifications or training:
- Public Bookkeeper Examination Certified
- Associate or Bachelor’s degree in accounting holder or Bookkeeper Certification holder
- Certified Professional Education holder with annual credit of not less than 24 hours
- Experience – bookkeeping services must have experience. If it’s a firm, check their website to know when they have been established. Most sites also post companies they have catered to. In your business, you must choose bookkeeping services that have experience with construction companies. This is essential as they need to be familiarized with construction terms and details to avoid mistakes, especially the jargon your business use.
- Technology – since businesses have developed into technological advancement, and so does a bookkeeping service. Although you still need to keep physical records of your financial transactions, choosing bookkeeping services using apps or other technological innovations for their system is rather beneficial. With such, you can still access your records online wherever you are. Or if your physical documents are lost, you’ll have your online storage.
- Reputation – although a bookkeeping services company may be popular or operating for a long time, you must check their reputation in the business world, specifically in construction industries. Because financial transactions are critical for businesses, bookkeeping services with a bad reputation may be a danger to your company. You can ask for referrals from trusted people so you can eliminate the ones they have a bad experience with. Or just by searching online, you can get a glimpse of how they deliver their services. However, you must still confirm online reviews as some are paid to give good reviews to attract more customers.
Your business’ success doesn’t only rely on how much you earn but how you manage your financial transactions. If you’re only counting your sales, then you might make decisions that could compromise your hard-earned business in the long run. Or worse, you may end up bankrupt or sued if you can’t properly maintain the financial records of your transactions.
That’s why bookkeeping services can do so much for your business. You won’t need to worry about your financial records since it’s already done. Moreover, you’ll be able to focus on executing your business strategies, instead of taking on the additional burden of managing all your financial transactions. Let your bookkeeper do the work so you can manage your business well.