If you’re a contractor in Austin, Dallas, Fort Worth, Plano, San Antonio, or the surrounding areas, you know how different your accounting books are compared with other businesses. Accounting for contractors is a lot different than accounting for a grocery store or a car dealer, and the professionals at S|CPA Group | A Member of the S|CPA Network can explain how accounting for contractors involves different methods even from other more traditional manufacturing businesses. You can’t afford to have an accountant that doesn’t understand the construction industry and especially doesn’t understand the juggling that happens when you are a contractor. Give S|CPA Group | A Member of the S|CPA Network a call today to meet with their team and learn how they can help your contracting business stay on track.
Characteristics of Accounting for Contractors
The approach to accounting for contractors is to understand how they make their money. A contractor is likely to have more than a single project going on at a time. This means that the contractor may have a person at each project, and they have three different projects at the same time. This can get really confusing unless you realize that accounting for contractors needs to approach things with a project-based bent. What this means is that each project is its own mini-profit center, and the various expenses and income associated with each project must be dealt with in an enclosed way, separate from the other projects that a contractor has. Each project is different from all others, from material costs to employee costs to subcontractors and other issues. This is why accounting for contractors must approach it as project-based.
But wait, aren’t contractors essentially building something like a manufacturer would? While it might seem like they are doing the same thing, and therefore should be treated the same, in truth they are different in an important way. A manufacturer has a single location, but a contractor has multiple locations, and those locations are constantly shifting. This decentralized production is the key difference, and this also affects the amount of inventory that a contractor would have on hand for jobs because it isn’t cost-effective to sit on inventory that might not be used in a timely manner, making those items in inventory less effective for the job they were intended for. As such, there is more variability in the material costs because of this lack of a large inventory that would allow for a more consistent material cost. This requires special tracking for each project when doing accounting for contractors.
The last important characteristic when performing accounting for contractors is that projects can last a long time, in some cases years. This means that cash management for each project is a huge concern, especially as it relates to the business as a whole. If you run out of money because you aren’t receiving the financial disbursements required, that doesn’t look good for any current or future projects that you might be working on in Austin, Dallas, Fort Worth, Plano, San Antonio, or the surrounding areas. The team at S|CPA Group | A Member of the S|CPA Network can help make accounting for contractors easy.