Case study of cost accounting to help the contractor understand why it is important to have this type of accounting in his business operation. Cost accounting is a different form of accounting that focuses on the respective project, product or service sold. Cost accounting excludes overhead expenses in its formula.
In construction there is little respect for processing paperwork. Contractors want to build projects, not deal with how paper is managed. But to gain a true understanding of what it costs to build a project and implement cost accounting, the contractor has to process documents in a meaningful way.
This is the second article in a series of articles walking the small business contractor step by step in implementing cost accounting in construction. This article focuses on designing and developing a document flow system for use in cost accounting. The next step after creating a document flow system is learning how to sort and process the documents that come into the office.
Taking a small construction company to the next level of financial success requires implementation of cost accounting. This article is one in a series designed to illustrate how you implement cost accounting in a small construction business. The first step in this process is design a file structure.
In construction accounting, the percentage of completion method is the preferred tool to account for revenues and direct costs of construction. If you are an owner of a contracting business, this is the best method of accounting.
There are two primary methods of reducing costs of construction. The first is cost negotiation and the second is cost shifting. These two methods have several tools in each to achieve overall price reduction. The following describes each method and the respective tools within each method that you can use to achieve overall cost reduction.
By using a concept of feedback and making changes to the business operation, a model of excellence can be achieved. This model allows the contractor to not get nickeled and dimed to the point of going out of business.
Cost accounting is an effective internal accounting process to evaluate company performance at the product/project level.
