018 | Construction Accounting Challenges and Solutions
Construction accounting has many moving parts, just like the job site. Monitoring multiple items accurately at one time can be a challenge. When all of these components are recorded, the financial statements will reflect a multitude of indirect costs. This makes it even more critical that construction firms implement cost-accounting methods that enable accurate tracking of their expenses to accurately project profit and loss.
Three key challenges are:
Cost of Goods Sold vs. Overhead Expense
Vendor billings against PO's
Invoicing errors
Three key solutions are:
Assign a G/L code in your accounting software to each vendor that is to be assigned Cost of Goods Sold expense to ensure costs are automatically entered to COGS and not into Overhead Expense by accident
Include a report of all active PO's monthly with your financial statements and review
Utilize a specific construction management app that only allows posting of invoices as a direct match to PO's/contracts
And as always, we are here to help! Reach out for assistance anytime.
