Do you own a construction company and wonder if you’ve employed the right accounting professionals? The only way to find out is to make sure you understand the differences between regular accounting and construction accounting.

‍

What is Construction Accounting?

Construction accountants are specialised accounting professionals that apply unique tax rules and financial reporting methods to the financial management of a company. Construction companies have projects and suppliers that interact with one another, but their deliverables are non-reliant and unsynchronised. A construction accountant scrutinises long-term projects, isolates deliverables and supplier billing, as well as fiscal reporting periods, to name a few.

‍

How is a Construction Accountant Different
From a Regular Accountant?

A regular accountant is employed by companies who’re in the business of selling services or products from a fixed location. This type of accountant is concerned with basic financial reports used for preparing annual tax returns, assisting management with making business decisions and more. Regular accounting includes balance sheets, profit and loss reports, and accounts receivable and payable reports.

‍

A construction accountant is used by businesses that work from non-fixed locations. These companies pack up their entire place of business, equipment, tools and materials and take it to the customer’s site. Essentially, these businesses sell, deliver or install customised products from a mobile shop at the customer’s location.

‍

Regular accounting and accounting for construction has the following key differences:

‍

Sales

• Regular: One to four categories.
• Construction: One to 10 categories of products and/or services.

‍

Cost of goods sold

• Regular: Products are sold in one to four categories.
• Construction: Indirect and direct job costs with hundreds of categories.

‍

Expenses or Overheads

• Regular: Maintains business operations.
• Construction: Uses extremely complex accounting methods, as some expenses used in regular bookkeeping have an indirect or direct effect on how the business maintains its operations.

‍

Break-Even Calculations

• Regular: Fairly simple to calculate since there’s a direct relation between expenses and income on every product or service. Running and calculating reports are comparatively more straightforward, and adjustments can be made quickly.
• Construction: Deals with many projects at once, which are all unique. This makes break-even calculations more difficult.  

‍

Bookkeeping for Construction
vs. Accounting For Construction

The financial focus changes when you do bookkeeping for a construction company. These companies are project-driven. Each project has its own labour and production costs, meaning each project is handled as a separate business within the company.

‍

A bookkeeper must also track labour, material and equipment costs between building sites. Production cycles are also influenced by seasonal changes. Suppliers can increase or decrease their prices due to their inventories fluctuating. Construction bookkeepers are responsible for precisely tracking costs and payments by checking that payments are made on time and ensuring enough funds are available at all times.

‍

Construction accountants employ all the information and reports provided by the bookkeeper and use construction accounting methods, such as accrual basis, cash basis, the CCM or completed contract method and the PCM or percentage completion method. These methods are then used to calculate the company’s recognised revenue, expenses and payable taxes.