Construction Accounting Tips

Construction – just like with any business – requires an accounting department that can deal with the finance end of things. It is the job of this department to handle everything that gets bought and sold and to keep track of payroll and to eventually do the taxes at the end of the year. It is not an easy job – but with a few tips it can be a little bit easier.

Methods

The first rule of thumb that you should follow is to choose a method and stick with it. You need to set up for yourself and everyone under you a set of rules that you will follow when reporting any income and expenses. There are two basic methods to use; the accrual method and the cash method.

Accrual Accounting Method. The majority of construction businesses will choose the accrual accounting method. With this you will record income or expenses the minute you receive them. This helps you to know exactly what you have in the bank and how much you are spending. The money you earn will be matched with the expenses. This will help you to know if you are on budget or not.

Cash Accounting Method. When using this method you will record the income only when you get cash from a customer. An expense will only be recorded when you have to write a check to a vendor. This is usually used by individuals and smaller companies. This can be confusing in large businesses because the financial information is not readily at hand.

Tax Time

When January rolls around many of us begin to get nervous and this is never more true than for a business. Tax time can be a heavy burden and nerve wracking – but there are tricks you can use that can make it a bit easier.

Look closely at every deduction you have to keep from paying back taxes, getting audited, and having to pay penalties. Any business equipment can be expensed under Section 179. This is an immediate tax deduction. Keep track of every deduction throughout the year as they happen.