617: What Every Contractor Needs To Know About Their Financial Dream Team

This Podcast Is Episode 617, And It's About What Every Contractor Needs To Know About Their Financial Dream Team

Navigating the world of finances can sometimes feel like trying to build a house without a blueprint. Between managing budgets, keeping track of expenses, and ensuring you're compliant with tax regulations, it's easy to feel overwhelmed. That's where your financial dream team comes in! 

 

Having the right people by your side can make all the difference in staying organized and achieving your business goals. In this blog post, we'll chat about the key players you need on your financial team, what each role brings to the table, and how to find experts who truly understand the ins and outs of the construction industry. 

 

Whether you're a seasoned pro or just getting started,  building a reliable financial team will be a game-changer in achieving your financial goals and securing the future of your business.

 

How often have you hired someone expecting they knew how construction works, only to find out they did not know about it or your particular type of construction? Let's examine what each professional does to help with your needs.

 

The Role of a Construction Bookkeeper

 

Construction bookkeepers are the unsung heroes of construction companies' financial management. They organize everything and ensure that every penny is accounted for. 

 

Ideally, a construction company's books are updated at the end of each business day so you can have an accurate account of your sales, expenses, and the bottom line. However, if your business is still in its early stages, without much financial activity or the funds to hire a bookkeeper, you should aim to reconcile your accounts at least once a week.

 

Here's what they typically handle:

 

1. Daily Transactions: Bookkeepers track daily financial activities, like invoices and expenses, ensuring all transactions are recorded accurately.

 

2. Accounts Payable and Receivable: They manage money coming in and going out, which is crucial for ensuring a healthy cash flow.

 

3. Payroll Processing: Construction bookkeepers often handle payroll, ensuring everyone gets paid on time and handling taxes and benefits.

 

4. Record Organization: They keep financial records neat, making it simple to pull reports or prepare for an audit when needed.

 

The Role of a Construction Accountant

 

Now, construction accountants step in with a more strategic approach! They not only keep the numbers in check but also help with long-term planning.

 

As a construction business owner, you'll want to work with an accountant from the very early days to help you 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 gauge the health of your business - and make the most of your accountant's expertise - you should check in at least once a month.

 

Construction Accountants focus on:

 

1. Project Costing and Budgeting: Accountants track project expenses to ensure they adhere to budgets and help identify areas for improvement.

 

2. Job Cost Reports: They create detailed reports that provide insights into each job's costs, which helps manage profitability and make informed decisions.

 

3. Financial Analysis: Construction accountants analyze a business's financial health and help prepare forecasts and budgets for its growth.

 

4. Regulatory Compliance: They stay updated on construction laws and regulations to ensure compliance with legal requirements.

 

The Role of a Tax Accountant (CPA)

 

Tax accountants bring their expertise to navigate the often tricky world of taxes. They help individuals and businesses understand their tax obligations while ensuring compliance. 

 

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. Remember that most Certified Public Accountant accounting specialists can do all accounting for most standard businesses that only need regular accounting, 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.

 

Here's what CPAs do:

 

1. Tax Return Preparation: Tax accountants gather and analyze financial data, preparing accurate tax returns for timely filing—no one likes penalties!

 

2. Tax Planning: They advise on strategies to minimize taxes and help clients maximize available deductions and credits throughout the year.

 

3. Knowledge of Tax Regulations: It is crucial to stay current on the latest tax laws, and tax accountants make it their mission to provide the best guidance.

 

4. Client Consultation: They help clients understand their tax responsibilities and the importance of good documentation.

 

Construction Accountants should not prepare annual tax returns—either they should be tax accountants and serve the interests of tax collection agencies, or they should be construction accountants and serve the interests of contractors. 

 

CPAs are like I.R.S. agents in that they owe their primary allegiance to the tax collecting agencies, and that is OK because the government needs our tax dollars to operate.

 

Construction accountants owe their primary allegiance to the contractor. Our role is to help the contractor optimize their construction company to generate the most cash flow and profit over the long term.

 

Conclusion

 

While construction bookkeepers, construction accountants, and tax accountants play essential roles in financial management, their focuses differ. Bookkeepers ensure the daily financial details are in line, accountants handle the bigger picture and strategic planning, and tax accountants help clients navigate compliance and tax planning.

 

Knowing what each of these professionals does can help you find the right fit for your financial needs, whether managing construction finances or dealing with taxes. Each role is vital for keeping everything in good shape and ensuring your financial health is on track!

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. She offers insights on managing 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 [email protected]