The tax season is here. This is when most construction company owners think about getting their construction bookkeeping system in order, so they can file their annual tax return for the previous year.
Keep in mind that each branch of accounting serves a different function similar to how it works in construction. There are framers, rough carpenters, and finish carpenters, and all three works with lumber, yet in most cases, the skill sets to do everything are rarely found in the same person.
If you're like many construction business owners, you may not be exactly sure of the differences between a construction bookkeeper, a construction accountant, and a Certified Public Accountant (CPA) - and whether you should hire one, or all.
An established, growth-focused construction company will employ the services of both an accountant and bookkeeper. The two professionals work in tandem to ensure business financials are up to date and accurate, and the financial health of the company is carefully monitored.
If you're still in the early days of your business, you might choose to do the bookkeeping yourself, or hire a bookkeeper for a couple of hours a month until it makes sense to bring someone on full time. An accountant, however, should be a key player on your team from day one.
Three Skill Sets = Three Types Of People
Bookkeeper
The primary role of a bookkeeper is to handle a company's day to day financial management. A bookkeeper will take care of the small but essential details that are essential for providing an accurate picture of where a business stands at any given moment.
In addition to a bookkeeper's main job – making sure every financial transaction is accurately recorded in the general ledger – they may also lend a hand with other critical tasks like invoicing, paying suppliers and vendors, and processing payroll.
Ideally, a construction company's books are updated at the end of each business day, so you always have an accurate account of your sales, expenses, and the bottom line. If your business is still in its early stages, however - without much financial activity or the funds to hire a bookkeeper – you should aim to reconcile your accounts at least once a week.
Accountant
An accountant's primary role is to help companies make sense of their numbers for strategic planning - analyzing, summarizing, interpreting, and reporting on financial data to provide "big picture" business advice.
As a construction business owner, you'll want to work with an accountant from very early days to help with budgeting, forecasting, and decision making – as well as for strategic tax advice and identifying opportunities to reduce costs and maximize profitability.
Many business owners think they only need to talk to their accountant once a year at tax time. But to be able to gauge the health of your business - and make the most of your accountant's expertise - it's recommended you check in at least once a month.
Your monthly meeting is a chance to review key reports, like your profit and loss statement, discuss opportunities or areas of concern, and get timely advice to help meet the goals you've set out in your annual business plan.
Certified Public Accountant
The CPA's primary function is to prepare the annual tax return, perform audits, and prepare Certified Financial Statements for bank loans when a construction contractor requires them before issuing a construction bond. Keep in mind that most Certified Public Accountant accounting specialists can do all of the accounting for most standard businesses who only need regular accounting but not construction accounting. Construction company owners who think it's costly to hire a construction accountant and would instead only seek a CPA's help might be in for more business damage in the long run.
Final thoughts
As your construction business grows, it's essential to have trusted financial professionals managing your books and providing strategic financial advice.
After all, the busier you get, the more complex financial management becomes - and the less time you'll have to maintain your books and try to make sense of all the data.
A trustworthy bookkeeper's services are essential for a thriving business, and hiring an accountant that specializes in the construction industry can do so much more than handle your taxes. Think of your accountant as a trusted business partner - someone whose services you rely on year-round for advice on how to increase profitability as you take steps to achieve your business goals.
P.S.
We are excited and honored that Randal is nominated for the 2020 Small Business Person Of The Year award in our city. If you are on Alignable, I would appreciate it if you can connect with us and "like" our recommendation.
Screenshot of Alignable nomination
About The Author:
Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com
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