Being a construction company owner, you would be aware of the five most popular accounting methods – job order costing, activity-based costing, production order costing, functional depreciation and the completed contract method. Which one is right for you?
Of course, the optimal construction accounting method varies depending on the unique needs and circumstances of your business. For instance, if you want to track job or project cost, then job order costing would be best. However, if you are inclined to seize opportunities to save cost, then activity- based costing is preferable.
Due to constantly changing accounting requirements and limited resources, it’s imperative for you to harness the transformative power of outsourced bookkeeping and accounting. Surprisingly, only 8% of construction companies have seized its full potential.
Here are the tips that will help you to unlock the power of outsourcing for your construction accounting needs.
Powerful Tips for Strategic Construction Accounting Outsourcing
When you transform your in-house accounting process to outsourcing, naturally, there are questions and hesitations that arise. How will this partnership work? Will it be cost-effective? What to consider when outsourcing construction accounting services?
To harness full potential of outsourced construction bookkeeping team, you need to consider the following key things:
Dedicated Team of Construction Bookkeepers
You need to consider partnership with an outsourced accounting firm that provides a full-service team, well-versed with the nuances of the construction operations and committed to accomplishing your daily, weekly, and monthly accounting needs.
The extended team of construction bookkeepers and accountants excel in managing project budgets, tracking expenses, dealing with payrolls and subcontractors, and handling the specific accounting requirements of this sector. Their expertise ensures accurate and efficient financial management, reducing the risk of errors and financial discrepancies.
“With an outsourced accounting dream team, I regained 35% of my weekly hours, achieved audit-ready financials, streamlined material management, improved cost estimation, and reduced 40% of monthly average operational costs.”
– Kent Warren, CEO of Jackson Builders Inc
Software Expertise
Accounting in the construction industry has seen a rapid evolution. So, certified professionals should possess a deep understanding of multiple accounting software solutions and technologies, ensuring that you benefit from streamlined accounting processes through a technologically advanced approach.
Rigorous Internal Control
The outsourced construction accounting service provider should be the guardian of rigorous internal controls, establishing a fortified financial infrastructure that safeguards against errors, fraud, and non-compliance.
System Access – The external team should provide secure and controlled system access, including virtual environment, document sharing and all ancillary systems and portals.
Financial Reporting – An ideal outsourced team ensures that you have access to comprehensive reports reflecting the financial health of your business. This includes balance sheet, income statement, cash flow statement, and management reports enriched with actionable insights through financial intelligence solutions.
Independent Audit – The outsourced team should facilitate a third-party assessment, adding an extra layer of trust and confidence for stakeholders.
Separation of Duties – The partner should establish a clear separation of duties, minimizing risks associated with errors and fraud.
| Stakeholders Involved | Duties |
|---|---|
| Implementation Team | Setup, document sharing, catch up, clean up |
| Service Delivery | Responsible for all deliverables |
| Team Leader | Review work, ensure on-time delivery, meet all service levels |
| Staff Accountant | Day to day Accounts Payable and Accounts Receivable |
| Senior Accountant | Reconciliations, recordings, month-end close, financial statements |
| Quality Assurance | Independent audit processed transactions |
This strategic division enhances internal controls, ensuring accountability and operational integrity.
Accounts Payable & Cash Oversight – The outsourced accounting partner should keep a watchful eye on financial transactions, leveraging accounts payable automation to identify irregularities, duplicate or erroneous payments, and fraud.
Scalability and Flexibility
Construction accounting needs can fluctuate significantly based on project size and complexity. During peak seasons or when juggling multiple projects simultaneously, the requirement for daily accounting tasks can skyrocket.
That is why your outsourcing provider should offer scalability and flexibility to accommodate fluctuating needs. Be it a short-term surge or long-term support, your partner should tailor outsourced accounting services, accordingly, ensuring seamless financial management without overburdening your internal team.
Risk Mitigation and Compliance
Being a construction company owner, you are subject to a range of federal, state, and local taxes, like sales tax, use tax, payroll tax, property tax, excise tax, permit and licensing. This can make tax time a stressful experience if you’re not prepared.
To ensure accuracy and efficiency, your outsourcing partner needs to be careful while keeping records of tax documentation, including invoices, receipts and records of tax payments. This will help to ensure compliance with tax laws and regulations, as well as simplify the process of preparing tax returns and responding to tax audits.
Strategic construction accounting outsourcing offers a plethora of benefits like high-quality accounting, reporting financials, cash flow projections and more, helping you to develop business growth strategy.
By applying these five key tips to unlock the power of outsourced construction accounting, you can gain a competitive edge, achieve better financial control, and position yourselves for sustainable growth in a demanding industry.
With the support of accounting experts with years of experience in the construction industry, you can streamline accounting processes, improve efficiency, and navigate complexities. This, in turn, empowers leadership to focus on providing the level of project excellence that keeps business running successfully.
