Are These Accounting Errors Costing Your Construction Business Cash?

November 17, 2020

Construction is one of the most labor-intensive industries out there — and we’re not just talking about the hard work of building. The planning process and job costing that goes into each project takes as much calculation and deliberation as pouring concrete or erecting a steel frame.

With so many balls in the air, how can you avoid mistakes that will affect your bottom line? Our experienced Construction Team has heard from many businesses over the years. Here are some common mistakes they see and how to head them off at the pass.

Failing to understand the entire job cost

This sounds like a very basic mistake, but our team sees it more often than we’d like. Often, this happens because the business takes only direct costs into consideration. Each job cost should include the following, as well:

  • Payroll: How many employees and contractors will you have on hand? What are their hourly rates? Will you bring in specialty contractors who might have a higher pay grade? If so, for how long?
  • Materials: This is especially tricky considering how the cost of materials has skyrocketed this year. Have you factored in price increases or forecasted price increases?
  • Insurance: This essential is sometimes overlooked but can have a significant impact on your budget.
  • Other indirect costs: Taxes, rent, utilities, change orders — and yes, even accounting — should factor into your estimate.

Letting balance sheets slip through the cracks

We generally see this error from smaller businesses, but even larger construction firms can make this mistake if they forget to update their liabilities and assets. Often, we see companies fail to project accounts payable, vehicle costs, and even their profits and losses. Our team can help you set up a dashboard to track every penny.

Passing up payroll

If you don’t record and report payroll appropriately, you could be setting yourself up for shortfalls and tax implications. When this happens, our clients typically forget to factor their own salaries or company income into the mix.

If you feel your profits tightening or are worried you haven’t crossed every T and dotted every I, we can help. Let our Construction Team review your labor burden, indirect costs, materials, and more. We can also arm you with easy-to-use accounting trackers that will help you see the full — and changing — picture of your project once it’s underway.

For decades, we’ve put profitable processes in place and helped construction businesses reduce their tax liability. Together, we can make 2021 your best year yet. Contact your accountant or email contactus@gccpas.net to find out how Grimbleby Coleman CPAs can help your construction business.

 

 

200 West Roseburg Avenue
Modesto, CA 95350

(209) 527-4220 (phone)
(209) 527-4247 (fax)

https://www.grimbleby-coleman.com/resources/articles/246

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Our Commitment to Safety and Prevention of COVID-19

Dear friends and clients,

Thank you for putting your trust in us to provide your tax and advisory services. These are rare and unusual circumstances; but be assured, we are committed to providing continued services and support over the coming weeks.

To lessen our societal impact, as well as to protect the well-being of you, our clients, and our team, we ask that the majority of our communications be electronic or over the phone (we have rescheduled all meetings to be handled in this way).

At this time, our office is closed to the public. You may drop off paper documents in our mail slot. We strongly encourage you to use our electronic collaboration tools for securely scanning and sending tax documents and we have the necessary data security in place to ensure security and privacy.

To read our January letter detailing our electronic collaboration tools, and specific instructions, click here. We are happy to assist in the set-up of any of these applications, if you have not used them in the past; contact our Admin team at the phone number or email below.

GC looks forward to normalizing our processes as soon as safety dictates. Be well and take care of yourselves, your community, and your loved ones. We are here for you professionally and personally, so do not hesitate to reach out.

All the Best,

Clive Grimbleby, President
Grimbleby Coleman CPAs
Certified Public Accountants, Inc.
(209) 527-4220
contactus@gccpas.net

 

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