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Elkins: Bookkeeping important in construction industry

Donnie Elkins
Tuesday, Nov 6, 2012

If you are a general contractor or own a supporting business such as plumbing, electrical, fencing, landscaping or other construction trade, your primary bookkeeping concern is job costing. To be profitable, you must bid a job accurately, measure your profitability when the job is done, identify any mistakes and continually improve the accuracy of your bidding.

Job costs include direct labor, indirect labor, subcontractors, job materials and other job-related expenses such as building permits and equipment rental.

Proper handling of subcontractors is vitally important. Subcontractors must be tracked and 1099’s generated for those whom you pay $600 or more per year.

Every item purchased for a job should be identified by job. The bookkeeper sitting in the office will not know what job a purchase belongs to unless it is clearly noted on the receipt. This is the heart of job costing. The client name, job name or address or number can simply be written on the receipt by the person purchasing or receiving the item.

Bookkeeping is so important to your business and your success; you cannot afford to delegate its design and maintenance to the inexperienced or untrained. This is doubly true when you add something as complicated as job costing to the ordinary bookkeeping tasks of writing checks, paying bills and invoicing customers. Select a good software package and seek the help of an expert consultant specializing in that software to set it up properly and train you and your bookkeeper.

The bookkeeper should not be your spouse, friend or relative who knows little or nothing about bookkeeping or job costing. It should not be your secretary or office manager who knows little or nothing about it either. After all, you wouldn’t hire an electrician to do plumbing, would you? It also should not be your CPA who charges far more than a bookkeeper and whose specialty is tax preparation and financial planning, not day-to-day bookkeeping.

Your CPA will appreciate your complete and accurate bookkeeping and tax preparation will be simpler and less costly. Most of all, you’ll have the information you need to make sound business decisions about how to manage and grow your business.

The bookkeeper is a vital asset to a construction company and without a well trained, accurate account of job costs, profitability could not be measured.

Donnie Elkins is the president of Elk Mountain Construction Co., located at 1950 N. Willow Ave., Cookeville. He can be reached at (931) 372-7424 or at donnie@elkmountainconstruction.com.


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