Implement Cost Accounting in your Construction Company

Cost accounting in construction is an essential requirement if the owner/management team wants to fully understand their production performance.  Cost accounting has several different forms and construction utilizes phase accounting to report the results of production.  In construction, cost accounting is a must if the company wants to understand how it can achieve profitability.

Implement Cost Accounting in Construction – Document Flow System

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. 

How to Calculate the Best Markup for a Construction Project

Markup for a Construction Project

Every construction project has costs beyond the direct costs and the contractor wants to earn a profit. To cover these costs he must have an appropriate markup. The contractor must give consideration to many variables and circumstances to calculate the best markup for a construction project. To determine the best markup percentage on costs, the contractor should consider his indirect costs, overhead, taxes, and final profit desired. 

Completed Contract Method of Accounting in the Construction Industry

Completed Contract Method

The completed contract method of accounting recognizes revenue and the associated costs once the project is complete. This is one of the two popular accounting methods used in the construction industry. For residential contractors, the completed contract method may have a slight tax advantage by deferring revenue recognition but is generally not considered the best method of accounting in the construction industry. 

Use Phase Accounting in Construction – Part II (Trades)

This section covers the three traditional trades that require a license from their respective state. This is your HVAC installer, the electrician and the plumber. In some contractor may wish to include the septic tank and water well installer. However, I prefer these two be included in the site development phase as they do impact the site and there is only one connection to the main builder for these two particular trades. 

Follow by Email
LinkedIn
Share