From looking at your inventory accounts receivable and accounts payable to organizing all your receipts, here are the 10 answers to the question, “As we close the books for 2022, what are the best accounting “to-do’s” that construction teams should do to organize previous financials for future success?”
- Review Inventory Accounts Receivable and Accounts Payable
- Double and Triple-Check Your Payroll
- Modernize Your Software
- Contrast the Expected Profits With the Actual
- Look Over Your Profit-and-Loss Statement
- Manage Your Books Like You’re Selling the Business
- Re-read Legal Contracts
- Compare to Industry Benchmarks
- Update Your W-9s
- Gather and Organize All Your Receipts
Review Inventory Accounts Receivable and Accounts Payable
One accounting “to-do” that construction teams should do to organize previous financials for future success is to review their accounts receivable and accounts payable.
This will help them identify any discrepancies and make changes to ensure that their finances are in order. For example, if one of their customers owes a construction team money, they may need to invoice them for the amount that is owed. This will help them keep track of their finances and ensure that they are getting paid for the work that they have done.
Tasia Duske, CEO, Museum Hack
Double and Triple-Check Your Payroll
Making sure you’re paying your employees the correct amount is key to successful accounting and something that should be done regularly. To ensure accurate reporting of payroll expenses from one period to another, make sure you have paid all payroll taxes and accounted for them in prior reports. This ensures that your finances are accurate and compliant with federal regulations.
Michael Fischer, Founder, Elite HRT
Modernize Your Software
As you close the books at the end of 2022, it’s important to update your software, so you have the most up-to-date programs. This will ensure you have the best tools available to you to help you prepare for future success. Updating your software will also allow you to have clean and organized historical records if you ever need to review past financial data.
Matthew Ramirez, CEO, Rephrasely
Contrast the Expected Profits With the Actual
Having managed the finances of a construction project myself, I know the value of regularly comparing expected profits to actual profits throughout the duration of the project.
It serves as invaluable feedback for understanding where and why you may have gone over budget—or exceeded expectations—allowing for prudent decision-making in future projects.
Using this comparison should be a must-do on any construction team’s accounting checklist if they are looking to become more organized and successfully build upon winning projects in the future.
Lorien Strydom, Executive Country Manager, Financer.com
Look Over Your Profit-and-Loss Statement
This will give you a big-picture view of how your construction business is doing financially. It’s important to understand the current financial state of your company and identify trends, such as areas where costs are increasing or opportunities for improvement.
Once you have that information, you can create actionable plans to address any challenges or take advantage of potential growth. Be sure to also check in with your tax advisors and review any changes in the local, state, or federal tax laws that may affect how you record financials for 2022.
Manage Your Books Like You’re Selling the Business
The construction industry overall is not known for having the cleanest organized books on paper. It’s like seeing a contractor that has stacks of bills and documents all over the windshield dash.
Accounting practices in construction can be messy because of the seasonality of work and juggling a lot of jobs at the same time with increased inflation on the cost of material and labor.
However, it does not have to be that way for those that want to ensure that their books are as clean as possible. As a professional marketer, I would give the vision to your accounting team to think like you’re selling the business. So how would you present the books in a professionally organized manner to an investor? It’s a new year and you can start by building your reputation to “clean the books.”
Re-read Legal Contracts
Construction companies must review all legal contracts, as this ensures that any changes in the law or accounting principles have been considered and that the financials comply with all applicable laws.
A thorough contract review should involve a close inspection of all contract documents, including the contract itself, any contractual appendices, and any related documents.
Pay special attention to any clauses that could lead to potential disputes or misunderstandings and any provisions that could create financial or legal liabilities.
You must also check to see if people have changed the contract since its original signing, as any new contract terms could invalidate the original contract.
Finally, review all deadlines, payment terms, and other important dates to ensure that you have met all financial obligations on time.
Tiffany Homan, COO, Texas Divorce Laws
Compare to Industry Benchmarks
Construction teams should compare their financial performance to industry benchmarks and trends, as well as to their own performance in previous years. This can help identify any areas where they are underperforming compared to their peers or to their own past performance and can help them identify opportunities for improvement.
Then, they need to focus on developing a budget for the coming year based on their review of past financial performance, as well as their projections for future growth and profitability. A well-crafted budget can help construction teams stay on track financially and achieve their long-term goals.
Update Your W-9s
It’s important to have the most up-to-date W-9’s for all contractors and subcontractors so that you can stay on top of your current tax liabilities. This will save you time in the future for filing taxes, as well as avoid any potential penalties because of incomplete or inaccurate records.
It’s also important to make sure that you are reconciling all outstanding accounts and staying on top of payments to vendors. This will help ensure that your books are in good order and make it easier to track expenses and revenue in the coming year.
Gather and Organize All Your Receipts
This includes not just your materials and labor costs but any other expenses you’ve made related to the construction project. Having all of your data compiled in one place will make it much easier to review during the tax season and compile financial reports for future projects.
Double-check the accuracy of your records to ensure that everything is up-to-date and that you have a complete record of all expenses. Taking the time to organize your finances before the end of 2022 will help set you up for success in 2023 and beyond.