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Today's Construction Accounting Systems: What Parts Do You Really Need?
Finding a Construction CPA
Construction accounting, when compared to other industries, is extremely complex, highly regulated and always changing. For that reason, it’s best that contractors hire an industry pro who knows all the nuances of construction accounting including: the need for over/under billing and gain/fade reporting, the advantages/disadvantages of various accounting methods, how to allocate overhead, how to read cash flow statements by job, and how to handle retainage. With a complete understanding of construction regulations and reporting requirements, as well as the contracting company’s unique requirements (e.g., certified payroll, equipment tracking, unit cost reporting, AIA, time and material billing), it is often the experienced construction CPA who recommends that contractors upgrade to an integrated job cost accounting system.
In contrast, a CPA who has only a limited understanding of construction accounting might argue that a generic software system is all a contractor needs. And for some small contractors, that may be very true. Many growing contractors, however, find that these systems fall short in terms of reporting capabilities, features and performance. Yes, that off-the-shelf software may be easy to use. And yes, the accountant may be very familiar with it. But what about all the job cost data (such as production reporting, certified payroll, overhead allocation) to which the contractor doesn’t have access? Is the CPA willing to come in and help the contractor manually prepare those reports? Better yet, is the contractor willing to waste time and resources to produce reports that other systems provide automatically?
The Construction-Specific Advantage
Among other things, construction-experienced CPAs understand the value that construction accounting software can bring to a contractor. They know that good job cost systems, which incorporate both traditional accounting and construction-specific functions, can help contractors better manage their jobs and their business. Construction accounting software also helps the CPA focus on what he or she does best. Most professional accountants do not want to spend their time performing mundane bookkeeping tasks for their clients, especially when sophisticated and user-friendly technology will do the job that generic accounting programs cannot.
As a rule of thumb, the ideal contractor/CPA relationship should involve crossing paths on a quarterly or semi-annual basis. Contractors who work with their CPA on a weekly or monthly basis need to take a hard look at their accounting software program, their own involvement in the company’s financials, their CPA… or all of the above. With the right accounting package, an outside CPA will not be doing a contractor’s monthly financials, monthly payroll taxes, or work in process reports. Instead of creating reports, a good construction-specific accountant wants access to a contractor’s reports. He or she wants to see overhead allocation, job to G/L tie-outs, gain/fade reports, backlogs, aging reports, and other data that will allow him or her to conduct precise audits, prepare accurate tax documents and give expert financial advice.
Choosing the Right Partners
Smart, successful contractors recognize their limitations when it comes to operating a business. They may be the experts in the field, but in other areas – such as accounting, law, or insurance – it’s always best to enlist the help of qualified professionals. When it comes to the complex and specialized area of construction accounting, CPAs who know and understand the industry make the best business partners.
Likewise, construction-specific accounting software programs offer what other non-specialized programs cannot. Their ability to provide contractors with detailed job cost reporting allows contractors to better manage their jobs and run their business.And no one knows more about which software technology will best meet a contractor’s needs than a construction-experienced CPA.