Use Phase Accounting in Construction – Part I

Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!

The most effective form of a financial feedback loop in residential construction is phase accounting. Phase accounting is a subset of cost accounting and generates accurate information in the world of new home and residential additions for small contractors building up to 20 houses per year.

A financial feedback loop is a method used in business to identify areas of poor or under performing production. In construction, it usually identifies a mismatch of the estimated cost to produce the addition or a new home to the actual cost it takes. It utilizes nine phases of construction and allows the owner to pinpoint problem areas or a failure to properly estimate or control the cost in that phase. The nine phases are as follows:

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