Taking care of the accounting tasks in the construction industry is more complicated than you think. The nature of the business is quite complex, and the accounting methods you have to use in this industry is different from other industries. Most contractors juggle numerous projects which are distributed across various sites. Not only do they have to construct buildings according to clients’ specifications but also manage cost, profitability and revenue. Revenue management becomes more complex when working on long-term projects. Contractors can increase their cash flow and maximise profitability by applying the best accounting practices. 

Few Vital Accounting Practices For The Construction Industry 

• Job Costing 
Most contractors work on numerous projects simultaneously. If they want to control costs, they have to attribute expenses to each job accurately. It also helps in measuring the profitability of each project. Most experienced accountants working for the construction industry know the importance of efficient job costing. It ensures that all direct and indirect expenses are allocated at their proper place. The construction company can monitor and ensure that all its finances are on track. They also monitor labour costs with time-tracking software. 
• Cash-Basis And Accrual-Basis Accounting 
Two common accounting methods are accrual basis and cash basis. Small construction firms prefer the cash-basis accounting system as it is more straightforward. It is the system of recording revenue as and when a company receives and expenses paid to the vendor. The primary objective of cash-basis accounting is to simplify daily financial management. On the other hand, accrual-basis accounting is a more complex accounting system required by large companies. It is widely used by public companies complying with GAAP issued by FASB. 
• Percentage Of Completion Method (PCM) 
Contractors widely use it to assess accurate revenue for each project. PCM is a very common accounting approach. It is the contractor's responsibility to record the expense and earned revenue at every stage of the construction project. This is very time-consuming and challenging. You can ease it by hiring accountants for construction companies. They use the latest software to maintain all the records and generate accurate estimates. 
Since construction companies have to follow so many accounting practices, it’s time you get in touch with the experienced accountants at BGS Accounting. 
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