Managing a construction project is like putting together a giant puzzle—every piece, from wages to materials, has to fit just right to avoid big surprises. Did you know that 85% of construction projects go over budget, with an average of 28% more than planned? That’s where CPAs come in. They help construction companies keep track of every dollar and make sure projects stay on course financially.
CPAs can simplify money management by setting up systems to track spending, creating budgets, and finding ways to save on taxes. With their help, contractors can avoid unexpected costs and focus on getting the job done right. This article highlights how CPAs make financial management easier for construction projects.
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Develop Robust Job Costing Systems
Accurately tracking costs is one of the biggest challenges in construction budget management. CPA firms can step in to help by setting up systems that make it easier to see where the money is going and where it can be saved. For starters, they create a chart of accounts specifically designed for construction businesses, so every expense is properly categorized.
They also configure accounting software to handle job cost tracking efficiently. This includes setting up processes to separate direct costs, like materials and labor, from indirect ones, like administrative expenses. To top it off, they design custom reports that make it simple for project managers to analyze job costs and make informed decisions throughout the construction process.
Assist with Budget Development
Creating a solid budget is essential for keeping construction projects on track, and CPAs bring the financial expertise needed to get it right. They start by reviewing historical data to help estimate project costs more accurately, ensuring that labor, materials, and equipment expenses align with the project scope.
CPAs also assist project managers in allocating overhead costs, making sure every expense is accounted for within the construction project budget. They go a step further by building contingencies into the budget to handle unexpected surprises during the construction process.
Additionally, they create detailed cash flow projections, helping contractors plan ahead and avoid financial roadblocks. With their support, construction budget management becomes a smoother and more reliable process.
Provide Ongoing Budget Monitoring
Keeping a construction project budget on track requires constant oversight, and CPA firms excel at providing this support. They perform regular budget-to-actual comparisons to ensure spending aligns with the plan, including material costs and labor costs. When discrepancies arise, CPAs identify and investigate variances, helping construction project managers understand the root causes and address them quickly.
They also forecast costs to completion, giving contractors a clear view of the financial path ahead. If adjustments are needed, CPAs recommend corrective actions to avoid overruns and maintain the project’s financial health. With their expertise, monitoring project costs becomes a proactive process, ensuring that budgets stay on track throughout the construction process.
Offer Tax Planning Strategies
Taxes can be tricky, especially for construction companies trying to manage associated costs and avoid surprises like cost overruns. That’s where CPAs come in to make things easier. They help optimize the timing of income and expenses, which can lead to big savings. CPAs also find valuable tax credits and deductions, like the R&D Tax Credit or the Energy Efficient Commercial Building Deduction (Section 179D), which can significantly lower what you owe.
They also guide businesses on setting up the right structure to save on taxes and ensure everything is compliant with current regulations—no penalties or late fees to worry about. Fun fact: tax compliance costs for big companies have jumped 32% in recent years due to more complex rules. With CPA support, construction companies can manage indirect costs better and keep their finances in good shape.
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Implement Financial Controls
Strong financial controls are essential for construction companies to protect their resources and maintain accurate records. CPAs bring their expertise to ensure systems are in place that keep everything running smoothly and securely, minimizing unforeseen costs. Here’s how they can help:
Design Internal Control Systems
CPAs help construction companies set up internal control systems that minimize risks and prevent errors or fraud. These systems include clear guidelines for tracking financial activities, ensuring that all project-related transactions, from material purchases to labor costs, are accurately recorded and monitored.
By integrating these controls with construction management software, contractors gain real-time insights into their financial data, improving the construction budgeting process.
Establish Approval Processes for Expenditures
To avoid unauthorized spending, CPAs design approval processes that ensure every expense is reviewed and signed off by the right people. This includes creating workflows for project managers to approve material orders or subcontractor payments. These processes help contractors manage their budgets effectively and ensure that a contingency fund is preserved for unexpected costs.
Implement Checks and Balances in Accounting Procedures
CPAs implement checks and balances to ensure the accuracy of accounting records. For example, they may separate responsibilities for invoicing, payments, and job cost tracking among different team members.
This reduces the risk of mistakes or fraud, giving construction companies confidence in their financial data and their ability to handle unforeseen costs.
Conduct Periodic Audits of Job Cost Records
Regular audits by CPAs help construction companies spot issues before they become major problems. These audits review job cost records to ensure expenses match the approved budgets and that indirect costs are properly allocated. Maintaining a contingency fund and conducting regular audits allows construction companies to stay prepared for any surprises that arise during their projects.
Provide Technology Consulting
CPA firms can help construction companies use technology to improve job costing and streamline financial processes. Here’s how they assist:
- Evaluate and recommend accounting software: CPAs identify the best accounting tools tailored to the needs of construction companies, ensuring compatibility with job costing and ease of use for project teams.
- Integrate job costing with project management systems: By linking accounting software with construction management software, CPAs create a seamless system that tracks costs alongside project progress, improving the construction company’s bottom line by reducing inefficiencies.
- Implement mobile solutions for real-time cost-tracking: CPAs set up mobile tools that allow project managers to log expenses and monitor budgets on the go, helping to address unforeseen costs immediately.
- Develop data analytics capabilities for cost insights: CPAs help companies harness data analytics to identify trends, spot inefficiencies, and gain valuable insights into project costs, enabling smarter decision-making.
Offer Industry Benchmarking
CPAs bring industry expertise, helping construction companies measure their performance and identify ways to improve.
Compare Job Costs to Industry Standards
CPAs can evaluate a construction company’s job costs against industry benchmarks to identify whether spending is in line with similar businesses. This helps contractors understand if their material, labor, or overhead costs are higher than average and pinpoint areas where adjustments might be needed.
Identify Areas for Potential Cost Savings
By reviewing job cost data and comparing it with industry trends, CPAs help construction companies uncover opportunities to save money. Whether it’s negotiating better supplier contracts or optimizing resource allocation, their insights can help reduce unnecessary expenses and improve the overall construction budgeting process.
Analyze Profit Margins Relative to Peers
CPAs analyze a company’s profit margins to determine how they stack up against competitors. If profit margins are lower than industry averages, they provide strategies to improve pricing, manage indirect costs, or streamline operations, helping boost the construction company’s bottom line.
Highlight Best Practices in Construction Finance
Drawing on their knowledge of successful construction businesses, CPAs share best practices in areas like cost tracking, budgeting, and financial reporting. By adopting these proven strategies, construction companies can strengthen their financial systems and make smarter decisions for long-term success.
Your Financial Partner for Construction Success
Managing the financial side of a construction project doesn’t have to feel overwhelming. Partnering with a CPA firm that understands construction accounting can make all the difference. Their expertise in job costing, budgeting, and financial controls helps contractors stay on track, avoid costly mistakes, and even boost profitability.
With Potrus CPA by your side, you can streamline your construction budgeting process, track every expense accurately, and plan for unforeseen costs. Their insights not only help you manage today’s projects more efficiently but also prepare your business for long-term success.
For contractors aiming to improve their financial management and stay competitive, partnering with a CPA firm is an investment in a stronger, more profitable future.
