Bookkeeping For Small Construction Business – Sometimes life forces you to use spreadsheets. If you plan to do your small business accounting with Excel, this is one of those times.
But there are ways to make the process easier. We’ll show you how to use the Income Statement Excel template to get you started.
Bookkeeping For Small Construction Business
Microsoft Excel (and its simpler cousin, Google Sheets) is adaptable. The better you know how to use it, the more you can do. That said, even if you’re good enough at Excel to compete internationally, there’s only so much you can do with it in a DIY accounting context.
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Before you get started with your DIY bookkeeping, download a copy of the income statement template. Later, you may prefer to use a different template or even create your own. But once you get started, the income statement template is neat and accessible. And it has everything you need to know about single-entry accounting in Excel.
Single entry accounting is a good option if you have a small, simple business with a low volume of transactions. Every time money comes in or out of your business, it is recorded once, as a positive (income) or negative (expense) value.
A quick note about double entry accounting. The double-entry bookkeeping method is standard for larger, more complex businesses. It is more effective than a single entry for tracking cash flow and protecting against errors and fraud. However, it is also more work to maintain and difficult to set up in Excel. If you’re at the point where you think your business needs double-entry bookkeeping, it’s time to use accounting software. Or, consider hiring an accountant (such as ).
Before you get started with your income statement template, make sure you understand the differences between single-entry and double-entry accounting. You will also need access to spreadsheet software such as Excel or Google Sheets.
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This list includes all the accounts that make up your books. Think of each account as a category. Each transaction you record is sorted into one of these categories.
This extracts information from your transactions and performs some basic calculations. It then summarizes how much revenue your business earned and spent in a defined date range.
The information in the copy of the income statement template you downloaded is only there as a placeholder. Here’s how to adapt it to your business.
The chart of accounts includes an account for “Gas & Auto”. But if you don’t drive to work, you don’t need this row, so you can delete it. The same goes for any other account that doesn’t apply to your company.
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Similarly, if there are transaction categories that you need for your business that are missing from the chart of accounts, you should add them.
By default, the income statement includes the data for each account listed in the chart of accounts. If you added or removed accounts from the chart of accounts, make the same changes to the income statement. For example, if you don’t track “Gas & Auto” as an expense, delete the row.
To generate monthly income statements, you will need separate sheets for each month. Make twelve copies of the original income statement, one for each month of the year.
Then, on each income statement sheet, change the date range (start rate and end date) to cover the corresponding month. Name the sheet with the name of the month it covers.
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When you enter income from paid invoices on your transaction sheet, include the invoice number in the description. This way, you can cross-reference them and avoid mistakes like forgetting to enter invoice payments or entering the same invoice twice. This is much easier if you have a separate sheet to keep track of your bills.
First, download a free invoice template for Excel or get one for Google Sheets. Next, add a new sheet to your income statement template. Copy and paste the invoice template data you downloaded onto the new sheet.
Keep your bill tracker tab to the right of your transaction sheet, but to the left of your monthly income statements. It will be easier to check for reference.
Excel spreadsheets are not up to the task of creating a proper cash flow statement that you can present to investors. However, for your personal planning, you can still plan your cash flow month by month in a simple spreadsheet.
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To get started, check out our Google Sheets cash flow projection template. Copy and paste it on a blank sheet next to your transactions.
Every time a transaction occurs, whether you’re moving money, cash or credit, you must enter it on the transaction sheet, in its own row. Then you need to categorize it.
When you use , your transactions are automatically imported and sorted. But for DIY accounting in Excel, you will do it yourself.
At the end of each month, the Income Sheet should have all the necessary data to summarize the accounting for that period. Be sure to keep separate Income Sheets, organized by month.
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You may want to make a copy of each at the end of the month and save or upload it to the cloud. Come tax season, your accountant will need your income statements for the year.
If you want to go beyond accounting and begin to understand your finances in a deeper way in Excel, we recommend starting with pivot tables.
This pivot table gives us a simple summary of how much we’ve spent from each vendor and how often we’ve bought from them.
There’s a lot more you can do with pivot tables. For more information, see the Microsoft Office for PivotTables training page.
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And if you just want some good old-fashioned Excel tips for leveling up, check out this in-depth article on the Hubspot blog.
This publication should be used for informational purposes only and does not constitute legal, business or tax advice. Each person should consult their own attorney, business advisor or tax advisor with respect to the matters referred to in this publication. assumes no responsibility for actions taken based on the information contained herein.
Get a weekly dose of educational guides and resources handpicked by experts to help you make the right decisions with confidence to grow your business. No spam. Unsubscribe at any time. Construction accounting is a form of accounting unique to the construction industry. Its purpose is for construction companies to better understand their financial situation by tracking and recording both expenses and incoming payments.
Like it or not, you need to find a way to manage your business accounting if you want to:
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Construction is a complex machine with many moving parts. This can make it difficult to track revenue and costs on a single project, let alone many.
No two projects are the same. It just costs money to move people and equipment to different locations. If you operate across state lines, you may also need to account for additional tax payments.
The more projects your construction company manages and the more workers you hire, the more important it is to keep your accounts in order.
Indirect costs are those that are essential to managing your business through projects. Examples include equipment repairs, insurance, transportation, and software.
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Project costs vary depending on the time and season in which the work is to be done, as well as the cost of materials and the strain on workers and equipment.
It should also be noted that the construction sector is very susceptible to political and economic fluctuations.
It’s not uncommon for circumstances beyond your control to affect the price of materials, equipment, and labor costs.
According to the Construction Financial Management Association, pre-tax net profits average just 1.4% to 3.5% for contractors and subcontractors.
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Contract retainage, which is the amount of money clients can withhold until they’re satisfied with a project, is typically 5-10% of a contract’s value. This can be up to 50% of a project’s net profit.
If you’re managing many projects at once, solid retention management is essential. It will ensure that you have capital in the event that a customer withholds money owed to them.
Keeping track of payroll is another element where construction accounting is essential. Unfortunately, it’s not as simple as agreeing on compensation with a worker and paying them the same rate per project.
A prevailing wage is the standard hourly rate for a worker in a particular state or locality as determined by regulatory agencies and the State Department of Labor in each state.
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In addition to giving you insight into where your money is going, receipts also serve as proof of your business expenses should you ever be audited.
Write down all the information on your receipts and invoices in case you ever need it. You can do this manually or through accounting software.
You should keep these three journals updated regularly to know how your business is doing, as well as prepare for a potential audit.
It allows you to estimate labor, material, and overhead costs, as well as determine how much you should charge for the project.
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Manual labor can be cost intensive, especially when dealing with complex projects. However, you can simplify the entire process with the help of software.
First, break
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