One of the most interesting – and frustrating – parts of accounting is this: it looks just a little bit different in every industry and in every niche. Here on the Techware blog, we talk a lot about construction accounting and how it differs from a more generalized approach to accounting.
However, we wanted to take a minute to explain a little bit about how accounting might look for a home builder – a niche within the broader construction industry. We’ll be sharing an overview of the process, a few tips and tricks, and some helpful solutions that can make your life a whole lot easier.
An Overview of Accounting for Home Builders
Home builders that are looking into smart accounting methods are likely to be interested primarily in job costing. While a more generalized accounting structure might not address job costing at all, it is absolutely essential to the construction accounting process.
Job costing is the term utilized by most in the construction industry to represent the total amount of funds estimated (and eventually used) for one specific project. As a home builder, job costing is likely to be one of your biggest, most time-consuming tasks. It’s essential for determining a final selling price, bids, subcontractor expenditures, and almost everything else that goes along with a job.
Get job costing wrong and you could end up underwater – get it right and you could be swimming in massive profits.
These days, many home builders have decided that going at job costing with a completely manual approach is far too risky. They’re choosing to rely increasingly on construction accounting softwares that make life easier and estimates more reliable. Here at Techware, we resell Sage software. Sage is a leader in the construction accounting industry and offers two powerful solutions built just for the construction industry. These solutions, Sage 100 Contractor and Sage 300 Construction & Real Estate, offer job costing alongside project management tools, invoicing capabilities, payroll management, and more.
Besides job costing, home builders also have to be aware of moving parts. It’s essential to keep track of subcontractors and the invoicing associated with them, potential union payroll, and the like.
Assembling Your Team
If you’re working to identify the personnel that will be necessary to run a detail-oriented, efficient operation, then there are definitely a few people that you’ll want to consider hiring. As someone who’s in the industry, you’re almost certainly familiar with each of these roles, so we don’t intend to summarize them here. Instead, we’re focusing on how each role relates to the accounting process.
CFO – Great CFOs track every cent. They know what’s coming in and what’s going out. Every CFO is a little bit different, but almost all work hard to track key performance indicators so that they’re sure of what’s working efficiently and what isn’t.
Accounting Manager – The Accounting Manager is typically responsible for all of the day-to-day accounting tasks: everything from bookkeeping to payroll. Great Accounting Managers can multitask excellently – juggling all sorts of tasks so that everything is handled in a timely fashion.
Senior Estimator – The Lead Estimator on any team is often responsible for whether or not the entire team profits on a job (or not). If an Estimator guesses low, it could cause serious problems. That said, great estimators are capable of setting up an entire company for success. An Estimator might be someone in a dedicated role or a utility player on the team. Either way, it’s essential that they have years of industry experience and an extreme attention to detail.
Project Manager – Keeping with timelines is absolutely essential. Even if an Estimator does their job perfectly, poor project management can derail an entire project and throw it off budget. Great Project Managers are extremely detail-oriented and are also flexible. They can handle situations that don’t go according to plan and can do it seamlessly.
Superintendent and/or Foreman – Superintendents and foreman alike play important roles in the accounting process. They’re responsible for executing on the plan that’s been laid forth by an organization. Those that keep careful track of every detail often have the most success in staying profitable. Obviously, this contributes to the necessity to work with superintendents and foremen that know the industry through and through.
Automation & Risk Reduction
One of the most significant changes any home builder can make is moving towards automating their process. Doing so is essentially synonymous with implementing risk reduction.
For instance, a common mistake in the construction industry is double-paying invoices. This kind of mistake, even when isolated, can cost a company thousands. However, softwares like Sage 100 Contractor and Sage 300 CRE have the ability to prevent these mistakes before they ever happen.
Managing Multiple Projects
As a home builder, it’s safe to assume that there will come a time where multiple projects are happening all at once. In times like these, managing incoming information from varying sites can be a lot to handle. The best way to handle all of this is to make detailed plans ahead of time so that you and your team are ready for anything.
Whether you work with the same models or entirely customizable options, your experience will be sure to help you determine how to be prepared for what you’ll face. Even though that’s the case, veterans should still take the time to lay out a precise plan for each and every project. Doing so could help team members to identify potential inefficiencies before they ever even become a problem.