Construction businesses in Australia face a number of challenges.

Like any small or medium business, they aim to increase profits, decrease costs, and maintain positive cash flow.

However, they also face many challenges most other businesses don’t face, including high equipment costs, and strong market competition when tendering for jobs.

If you own a construction business, you’ll no doubt be familiar with these unique business challenges. However, what you may not realise is that you can better prepare your business to address these challenges through accurate construction bookkeeping and reporting.

Common Challenges

If you’re like most construction businesses, you probably do your books by hand. Thanks to a combination of human error, and time constraints that cause you to fall behind in your accounts, doing your books by hand can lead to lost revenue or unnecessary costs, both of which equate to decreased profits for your business.

If you struggle to keep your books up to date, or you do them by hand, the following common challenges might sound familiar:

• Poor tracking of payments (leading to overdue invoices and late contractor payments)
• Lack of tracking change orders (leading to job profit reductions)
• Ineffective inventory control (leading to over- and under-stocking)
• Ineffective job costing (leading to a loss on completed jobs and/or cash flow issues)
• Lack of understanding of Taxable Payment Reporting (leading to costly and time-consuming problems with the ATO)

Thankfully, with proper construction bookkeeping and reporting practices, you can avoid and mitigate all these challenges.

Construction Bookkeeping With EzyAccounts

At EzyAccounts, our experienced and qualified bookkeepers are familiar with the bookkeeping challenges construction businesses like yours face. (You can download the case study at the bottom or side of this page or view the case study here.)

For a free discussion about your business’s construction bookkeeping requirements, call us today on 1300 313 397.

Construction Bookkeeping

Using The Right System & Getting Up To Date

When you engage a professional bookkeeper to assist your construction business, the first thing they should do is help you to identify and implement the most appropriate bookkeeping system for your business.

To identify the right system, your bookkeeper will analyse your current processes, and identify areas that can be streamlined, improved, or otherwise addressed to ensure more efficient and accurate bookkeeping and recording.

Because the majority of your work hours are no doubt spent onsite, it’s important that you implement a mobile bookkeeping system. This will allow you to record any change orders or other important information on the spot, making this and other aspects of your business’s bookkeeping as quick and easy as possible.

Once you’ve selected and implemented the most appropriate bookkeeping system for your construction business, your bookkeeper will then help you to bring your books up to date. No matter how messy or incomplete they may be, your bookkeeper will be able to get your accounts up to scratch.

Using The Right Reporting

Once you’re confident your accounts are both accurate and up to date, your construction bookkeeper can use them to generate reports and forecasts to help you improve your business’s profitability and efficiency.

Some of the key reports you will want to consider in your construction business include: cash flow forecasting and variance analysis, job costing, taxable payments reporting, inventory management, and, if you have employees, payroll.

Cash Flow Management

Cash flow can be a construction business’s nightmare.

Large numbers of suppliers and contractors, not to mention any employees, can place heavy cash flow pressures on your business. As such, cash flow forecasting can be extremely beneficial. Depending on the size of your business, this may be conducted weekly, or monthly.

Cash flow forecasting involves predicting the money that will move into and come out of your business during a set period of time. It allows you to plan for payments to suppliers and contractors, while lessening the danger of cash shortages in your business.

At the end of each period, a variance analysis will examine any spending or income that was different to that forecasted. This can help you to identify and address any unnecessary drains on your business’s cash before they get out of hand.

Job Costing

For your cash flow forecasting to be effective, you need accurate job costing analyses.

A job costing analysis should include the following items:

• Cost of materials and equipment
• Labour costs – including subcontractors
• Transport
• Insurance/s

Your costing analysis should be flexible enough to allow you to track change orders as the job progresses. Inaccurate job costing, or a failure to track change orders, can place cash pressures on your business, leaving expenses spiralling out of control, and significantly reducing your profits. Getting it right, on the other hand, will help you to maintain a healthy cash flow, minimise expenses, and increase profits.

Taxable Payments Reporting

Businesses in the building and construction industry that make payments to contractors for building/construction services, and have an ABN, are required by law to report Taxable Payments to the ATO on an annual basis. As you can imagine, most construction businesses fall into this category. This has been part of tax law since 1 July 2012.

The reason your business needs to report payments made to contractors is so the ATO can match this information against other data to ensure that contractors are lodging tax returns that include all their income, and are not trying to dodge their tax obligations.

Accurate construction bookkeeping makes Taxable Payments reporting a breeze, as the information is easily accessible in your systems. However, if your accounts aren’t accurate and up-to-date, Taxable Payments can be a costly and time-consuming headache.

Your bookkeeper can help you keep your accounts up to date so that you are easily able to fulfil this legal responsibility.

Do You Need Payroll?

Every construction business has faced the question of whether it’s more economical to employ staff, or use contractors.

Too many staff can create unsustainable overheads and expenses that diminish or wipe out your profits, while engaging contractors can be frustrating when it comes to meeting project deadlines. Employees are more reliable and easier to schedule, but contractors reduce administration time, as you only need to pay invoices, not process superannuation and PAYG, etc.

Both solutions have their advantages, and their disadvantages. However, if you do hire employees, you’ll need construction bookkeeping software that includes payroll processing, and is equipped to properly handle superannuation and PAYG payments. Your bookkeeper will help you choose the appropriate software, and provide training and assistance with using payroll features.

Inventory Management

With pressures including weather conditions and contractor scheduling already impacting your business’s ability to meet deadlines, the last thing you want is for work to be held up because you don’t have adequate supplies for an aspect of a job, and have to wait for re-order and delivery.

Conversely, overstocking different items and supplies can negatively impact your cash flow and profits.

To prevent both these problems, it’s imperative that your business has appropriate inventory management systems in place. This includes accurate record keeping, and the ability to project and forecast any additional items that may be needed. Most construction bookkeeping software will either include inventory management, or have an inventory management add-on.

Of course, to complement your software, it’s also important to maintain good relationships with the trade suppliers who will be supplying and delivering items, as this can save time and even money when you do face shortages.

Call Us Today

If you want to say goodbye to doing your books by hand, or would like to enjoy the many benefits of accurate bookkeeping and reporting described above, EzyAccounts can help. Call us today on 1300 313 397 to learn more, or to discuss your construction business’s unique needs.

Recommended Packages

Depending on the size of your construction business, we recommend the following bookkeeping packages:

0-5 Employees

• Monthly bookkeeping
• BAS lodgement
• Full payroll management
• Rolling 12 month cash flow forecasting, showing monthly monetary movements
• 12 month forecasted budgeting, with job costing analyses
• Monthly sales analysis to facilitate inventory management

6-20 Employees

• Weekly bookkeeping
• BAS lodgement
• Full payroll management
• Rolling 12 month cash flow forecasting, showing weekly monetary movements
• 12 month forecasted budgeting, with job costing analyses
• Monthly sales analysis to facilitate inventory management

21+ Employees

• Weekly bookkeeping
• BAS/IAS lodgement
• Full payroll management
• Rolling 12 month cash flow forecasting, showing weekly monetary movements
• 12 month forecasted budgeting, with job costing analyses
• Weekly sales analysis to facilitate inventory management

To discuss your business’s bookkeeping needs, or if you have any questions, call EzyAccounts today on 1300 313 397.