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The Basics of Construction Accounting Part 2

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While traditional accounting entails using no more than a ledger, construction accounting consists of an assortment of moving parts designed to analyze single projects and keep funds flowing from one project to the next. Below, a Florida construction attorney will discuss one of the most important aspects of construction accounting: job costing. Understanding job costing is essential for contractors that want to bid accurately and improve production methods. For a knowledgeable legal partner that is familiar with all aspects of construction law, consult a Florida construction attorney from Cotney Construction Law. 

Job Costing

An obvious hurdle for construction companies is the fact that construction projects are seldom on the same site. As mentioned in part one, there are numerous expenses that result from the mobile nature of construction. In order for construction companies to succeed, they need to track the costs and activities of each project separately. This the basic idea of job costing. 

For traditional businesses, a ledger is all that is needed to track transactions and stay on the ball. In construction accounting, the ledger and job costing work hand in hand to provide contractors with a complete picture of their expenses. A ledger provides a comprehensive report of a company’s financial health, while job costing provides a snapshot of the expenses on a single project, including labor, materials, and activities. In addition to keeping track of monetary costs, job costing keeps track of hours worked and percent of project completion. These expenses can be further broken down into subcategories, such as project phases or types of materials used. 

Striving for Constant Improvement 

Armed with the above information, contractors are able to properly oversee costs and production. When you know for certain how much your projects are costing and how long they’re taking to complete, you can accurately bid on future projects and avoid stretching your company too thin. Furthermore, you can discover trends that may be hindering your company, such as productivity loss due to modified work schedules. By implementing job costing, you can not only improve current projects but also improve your entire production process, a boon for any construction company that wishes to stand out from the crowd.  

For more information on income recognition and retainage, read part three. Read part four for our conclusion and discussion on billing and payroll. 

If you would like to speak with one of our Florida construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.