Like any other business, if you’re starting a construction business it pays to do it properly. That means getting your accounts in order before you take on any work. But building projects can last for months or even years and you might be both an employer and a contractor. Plus, construction accounting regulations vary around the world so it’s important to get local advice, if you’re operating in more than one region.
One of the most important things to know about construction accounting is that you have to do it regularly. That means you need to update your accounting software with expense reviews, your cash flow, updated employee information and generated invoices at least once a week. If you fall behind in your accounts, things can quickly get out of hand. It’s a fast-moving industry.
Big expenses should always be matched by big revenues. Invoice your client on a regular basis – and get payment upfront for major materials or labour expenses. If a client’s payments stop for any reason, so should your work. Many small construction firms fail because of bad debts. If you manage your cash flow carefully, you won’t be one of them.