It’s no secret that the tracking and reporting requirements for the construction industry are complex — especially with revenue recognition and tax changes in play. Not only can the rules vary by state and county, they can also change from worker to worker. Add to this the challenge of keeping job costs and financial analysis precise through narrow profit margins. It’s no wonder that numerous contractors turn to outside help to manage it.
Yet, despite the many capabilities of construction-specific CPAs, some contractors may not be sold on the full value of a CPA — and those contractors may be missing out.
What Is a Construction CPA?
At the basic level, a construction-specific CPA is a certified public accountant with an experienced understanding of how construction businesses operate and handle job costing. However, construction-specific CPAs can do much more beyond helping a company file federal, state and local tax returns or prepare financial statements.
They also understand the specific business concerns contractors face on a day-to-day basis, including reporting needs like percent complete reports or work-in-progress (WIP) reports, as well as risk management and cost controls. Construction-specific CPAs have the experience to help contractors tailor their job cost structure and can also aid in the implementation of systems like job cost accounting software or ERP packages. Beyond that, they’re also able to act as a liaison between other industry professionals. They can help contractors establish relationships with banks and bonding agents.
How can you tell if a CPA is construction-focused? A well-rounded construction CPA should have professional experience working with a wide range of contractors, they may also be certified by an industry association like Construction Financial Management Association (CFMA).
As a result, they should have their finger on the pulse of the industry, so to speak. As such, they’re in a prime position to guide contractors into the best practices for their business.
Which is part of what makes them so important.
Why Do You Need a Construction-Specific CPA?
You might think of a CPA as an industry-experienced business advisor. It’s more than just taxes and high-level bookkeeping. They’re knowledgeable in the practices and requirements that make construction businesses profitable and healthy. That includes those everyday improvements that can make the difference for a company.
To start with, a construction-specific CPA can help a contractor be more precise in their cost accounting. When reporting for your construction business, small mistakes over time can hurt a company down the line. Take, for example, overhead allocation. If a contractor isn’t accurately measuring how overhead impacts each job, they’re likely not getting a clear picture of the real costs on each. This in turn can lead to underestimates where they’re eventually unable to cover the actual costs.
Therefore, a construction-specific CPA who knows your business can help determine what to allocate and how to do it — because one size doesn’t fit all, nor does it fit every situation. For example, a labor-intensive contractor may decide to allocate costs based on field hours or labor and burden costs. An excavator might choose to allocate based on their equipment hours. But it all depends on what makes sense for your company. A construction-specific CPA can help you make those calls.
They can also review your books and give advice on future financial decisions based on:
- your company’s operations
- your past and current financials
- and industry changes like new tax laws, material price increases and more.
Having an experienced expert to keep track of the health of your company is vital in an industry like construction, where precise budgeting is necessary to make better bids and win jobs.
So now that we know what a construction-specific CPA does, how can you find one?
How to Find a Construction-Specific CPA
There are a couple different routes you can take when searching for a good construction-specific CPA. The first may be the easiest — ask around. Whether you belong to local or national construction organizations or just have friends in the business, chances are someone you know is working with a construction-specific CPA or firm.
However, if you don’t know anyone using a construction-specific CPA, you may be able to get some help from your construction accounting software provider. Many construction-specific accounting software vendors are likely to have ties to construction CPAs. And even while they can’t recommend specific names, they should be able to point you in the right direction.
Lastly, you can search online CPA directories to find a CPA that meets your company’s needs.
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