If you own a general contracting business or one of the supporting businesses, such as plumbing, electrical or drywall, then you will need to keep accurate records. The most important records are for the job in terms of accurately bidding the amount of materials, labor and amount of time will need to be scheduled to complete the project. After the job is completed, you will need to be sure that you compare your estimate to your actual costs to determine profitability, as well as identify any bidding mistakes to avoid for the next time. Working with a tax professional or accountant, such as _____________________ in _______________, ________, you can determine the best method to track these bids through your process.
Choosing a Bookkeeping System
In order to do this effectively, however, the first step is to choose a bookkeeping software that can address the unique needs of your business. Some of the key features that you should consider include:
Additionally, you will want to be able to track the job costs, such as direct labor, any indirect labor, subcontractors, job related expenses, such as permits and equipment rental, as well as job materials. Therefore, it is important to look for a bookkeeping system that addresses these needs. While there are bookkeeping software systems that have been made specifically for the contracting business, it may be worth exploring a more standard system that is user friendly and that you can customize to your business needs.
Payroll Considerations
Payroll costs are a key component to keep in mind when choosing your bookkeeping software. If you are going to handle your payroll internally, then you need to be sure that you can meet the deadlines set by the IRS, as well as paying the proper taxes and making accurate reports. This will allow you to track the payroll costs against each job. However, if you are not confident regarding meeting all the necessary payroll requirements, then you will want to consider using a payroll service. But this will mean that you need to then take that information and input it into your system for each job.
Consider hiring an internal bookkeeper or using a service that can input the information directly into your personal system or sync them to make the service more cost effective.
Subcontractors are also part of your business. These individuals will need to have 1099s generated for them. In addition, you need to be sure that you are meeting the IRS definition of a subcontractor versus an employee. If you do not classify someone correctly, it can end up costing thousands of dollars in potential penalties and fines.
Classifying Expenses
When it comes to expenses for a job, you need to be sure that you clearly classify them for your bookkeeper. This will allow them to properly identify the job that the expense belongs to and gives you a clearer picture of how much profit or loss the job actually had.
At the same time, you need to be sure that you are accurately addressing sales tax. If the material is purchased in one location, but the materials are used somewhere else, there may be additional taxes due beyond what was paid when the materials were initially purchased. If these items are missed, then you might find yourself paying additional taxes, penalties and interest.
For the overall bookkeeping aspects of this business, it is important to consider hiring a professional bookkeeper who is familiar with the ins and outs of the construction business. Doing so will assist you in meeting your obligations without anxiety throughout the year. As you consider a bookkeeper, it might also be worth exploring their experience with payroll, thus combining two tasks into one individual.
Dennis O'Brien