Do I need a bookkeeper who understands construction?
Construction accounting works differently from standard small business bookkeeping. If you’re a general contractor or trade specialty company, a bookkeeper who doesn’t understand construction will produce financial statements that are technically correct but operationally useless.
Job costing is the biggest issue. Every dollar you spend on materials, labor, and subcontractors needs to connect to a specific project. A general bookkeeper categorizes expenses by type but doesn’t track them by job. You end up knowing your total material costs for the year but having no idea which projects made money and which ones bled. Proper construction job costing requires knowing how to set up cost codes, track committed costs, and compare budget to actual at a level detailed enough to be useful.
Progress billing and retainage are construction-specific concepts that most bookkeepers have never encountered. If you bill on percentage of completion or hold retainage on subcontractors, your bookkeeper needs to handle work-in-progress calculations and track retention payables and receivables separately. Get this wrong and your financial statements misrepresent your actual position, which matters when you’re applying for bonding or a line of credit.
Subcontractor tracking requires understanding 1099 reporting, certificates of insurance, lien waivers, and compliance with prevailing wage requirements on public jobs. If you work on prevailing wage contracts, you’ll also deal with certified payroll requirements. A San Diego bookkeeping service that works with contractors will already know how to handle these reports and track union classifications by project.
Change orders need separate tracking from the original contract. A construction-savvy bookkeeper keeps original budget versus approved changes versus actual costs so you can see true performance against your estimate rather than a muddled combination of scope creep and cost overruns.
The answer isn’t necessarily that you need the most expensive bookkeeper around. You need one who has worked with contractors before and understands the industry. When interviewing potential bookkeepers, ask how they handle job costing, WIP, and retainage. If they look confused, keep looking.
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More Questions
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