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 firstname.lastname@example.org to find out how Grimbleby Coleman CPAs can help your construction business.