Bookkeeping and Accounting Tips for the Building and Construction Industry
Keeping on top of your finances when running a business is a key factor in how smoothly a business operates. This is especially true when it comes to the Building and Construction Industry. Trades in Construction and Building have a tendency to be more fluid when it comes to business structure. This is due to a higher rate of hiring contractors, sub-contractors and one-off teams for all kinds of different projects, making your business bigger one month, and maybe smaller the next! For this reason, having a good system in place for your business is essential so you don’t lose track of anything – and don’t miss out on any deductions.
This month we look at some bookkeeping tips that you might find useful as a Tradie.
Know what you need to keep track of
Due to the nature of the industry, with various teams, materials costs, and contractors used on a project, keeping track of comings and goings is a vital part of your business bookkeeping requirements.
As a contractor, it can be very easy to lose track of what is being spent on supplies or other ongoing costs through the course of a job, as well as knowing which customers have paid or still owe you for a project (or even progress payments). Using cloud-based software for your bookkeeping tasks (such as Xero, QuickBooks, or MYOB) can help you easily store all the records you need to keep for your tax agent.
• Keeping track of receivables. Entering every payment you receive from clients means you will always know who is paid up and who is late.
• Keeping track of expenses. Regularly entering your receipts into your books helps you keep project costs under control. Your bookkeeping agency can also use this information to help compile reports and find ways you can increase profits.
• Keeping on top of bills. Make sure you’re tracking any business bills as well as the receivables and expenses of your project.
Keep an eye on your cash flow
Often businesses will pay for the necessary materials upfront and this can lead to issues if the client runs out of money partway through. Keeping cash flow balanced by making sure expense is always matched by revenue can help your business avoid a major loss – or even bankruptcy.
Having a good invoicing system where you invoice your clients regularly throughout your project is important, as it helps ensure you receive payment upfront for the necessary labour and material costs involved. If payments aren’t received, work should not continue.
It is also good practice to make note of your job costs versus the profitability of the job. Balancing these out means you’re always working in an efficient and cost-effective manner. Over time, and through growth and experience, this information will also help you know which jobs bring in more profit and which may not be worth your time.
Research your industry-specific bookkeeping requirements
The building and construction industry has a few industry-specific things to note when it comes to accounting and bookkeeping services.
Contractors, for example, are often hired to perform specialist skills such as plastering, concreting, scaffolding, electrical, and plumbing. For tax reporting, superannuation, and workers compensation purposes you’ll need to be clear about whether these specialists are hired as employees or contractors.
Hirers must pay superannuation contributions if contractors:
• Are paid wholly or principally for their personal labour/skills
• Personally do the contract work, and
• Are paid for hours worked rather than to achieve a result, even if they quote an ABN.
You can find out more about super and contractors via the ATO website.
Also, any Australian businesses providing building and construction services need to lodge a Taxable Payments Annual Report (or TPAR) by 28 August each year. This TPAR advises the Australian Tax Office of payments made to contractors, subcontractors, consultants, independent contractors and some government entities for the provision of services. The ATO uses this information to identify contractors who haven’t met tax obligations. You can find more information on TPAR here.
Taking the time to properly organise a system for construction accounting means your business has a strong foundation in good practice, making it easier to do the work you love to do rather than drowning in receipts and red tape.
Software and mobile apps like Xero, QuickBooks, and MYOB make it easy to keep track of expenses and receivables. You can scan copies of receipts on the road and even send invoices straight from the job site using a laptop, tablet, or your phone.
You can also store important information or records online using cloud-based storage, meaning the information you need is easily accessible wherever you go. Most of these apps are fairly easy to learn to use and will help you be organised for any offsite bookkeeping agency you engage for your business.
Hire a Professional for your offsite bookkeeping
Hiring a professional to handle the more complex aspects of bookkeeping for your business means you can not only focus more on the work you love to do, but also rest easy knowing someone with expertise and industry know-how is managing our financial affairs. Outsourcing your bookkeeping to a firm like Focus Bookkeeping can help ease the burden of organising your books, particularly when coupled with some training in your cloud-based accounting software.
We can offer a range of services from handling the day-to-day accounts, processing your expenses, bills and invoices to helping you with your business accounting structure and advising you on ways you can save when it comes to tax reporting by maximising deductions and making sure you pay what you owe. How much control you give over is up to you, but having a strong team supporting your business can mean huge potential savings in the long-term!
Focus Bookkeeping provides quality bookkeeping services for small to large sized businesses, without a hefty price tag. Plus, we have specialist knowledge in the Building and Construction Industry, meaning we can help you organise your business by replacing stress and uncertainty with clarity and control.
Here at Focus Bookkeeping, we’re proficient with Xero, QuickBooks, and MYOB and we can train you to be more efficient so that you have more time to focus on your projects. We offer a comprehensive review of your accounting systems and focus initially on the critical aspects of your building and construction business, such as cash flow management and setup, explaining bookkeeping services for your business in language you can understand.
Get in touch and let’s get started!