Construction Accounting
Is Important Aspect
For Any Project Success

The entire success of the Sewer Contractor project depends on accurate Construction Accounting. Suppose you are in Saudi Arabia and in the field of sewer contracting, then the success of your contract will depend on the accounting feed back. Though construction is the visible face of the project, Accounting is the backbone, which can make or break the contract.

Each project should be treated as a separate 'profit center' and the Accountant should keep track of income and expenses for each project. By analyzing various parameters, the Accountant can see if the project costs and income are according to the estimates based on which the contract was accepted.

WHAT ARE THE FIVE MAJOR ELEMENTS IN THIS ACCOUNTING?

Labor:
This cost is crucial to the cost of construction. The time lines for different jobs and the labor required must be constantly monitored. At times, specialized skilled labor may be needed. Labor should not be kept idle for want of materials or machines. All this requires careful planning, co-ordination and monitoring.

Materials:
In any construction project, it is essential that requisite materials are available at the correct time and in the correct quantity. With proper planning and monitoring, cost of materials being purchased can be reduced by resorting to bulk purchasing, etc. Extra material adds to the inventory costs, while lack of material will keep labor idle and cause time and cost overrun. Inventory levels of material should be kept at the optimum level.

Equipment Rental:
Renting of equipments compose a large share from the cost sometimes, because many subcontractors don't have all the needed equipments and machinery for work, therefore they resort to rent from outside sources.

Sub-contractor:
At times, the construction may require a sub-contractor. It is vital to see that the sub-contractor is carrying out his work according to schedule, maintaining proper quality and is not taking any shortcuts. The sub-contractor's bills should be monitored carefully for accuracy, etc.

Other Expenses:
Costs such as (insurance, depreciation, equipment costs and supplies) are also costs associated with the project. The Accountant should keep a careful watch against any wasteful expenditure.

HOW IS CONSTRUCTION ACCOUNTING MONITORED?

It can be monitored by using general ledger accounts, accounts payable, accounts receivable, payroll, job costing, fixed assets, inventory, etc. The accountant by using these accounts can monitor costs and revenue closely.

He can check if payment for bills raised has been received as scheduled. He must monitor if payments for labor, materials and sub-contractors have been made. He can analyze and match income and expenditure to see there is no major mismatch. The Accountant can also carry out tax planning.

Careful analysis of project costs will reveal any cost overruns, and corrective action can be taken. By analyzing the inventory it is possible to check if the material used matches the need or if any inventory is being pilfered, etc.

As you can see, Construction Accounting is crucial to the success of the project, and the Accountant has to keep his eye on many factors. Fortunately, software exists in the market to keep track of construction accounting.

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