The accounting used in construction firms is a little bit more complex as compared to other business forms. This is due to the difference in nature and type of work, fluctuating operating cost and project-based pricing, and more.
For example- construction firms can work on project-based, where payment in some cases is made immediately on the completion of the project, while payments for some contracts can be delayed for months.
Due to this, construction firms must prepare separate income statements for different projects. Moreover, construction firms provide a wide range of services (like engineering, designing, material sourcing, consulting, and more) than other regular businesses.
Why are accountants needed for construction firms?
Due to the complexity of the functions performed by the construction firms, hiring an accountant is in the business's best interest.
The recent changes introduced by the UK government in construction accounting have made it even more crucial for construction firms to hire the best accountant to provide them with the right support.
One such change is VAT domestic reverse charge for building and construction services designed to reduce VAT frauds in the construction sector.
A good accountant will help save your time and money and provide guidance based on your firm's specific needs and requirements.
A construction accountant can help your firm by performing the following functions:
- Construction accountants are responsible for reviewing construction budgets and approving expenses. Their job is to ensure that the construction payments are collected timely and billings are issued to the clients properly.
- Construction accountants analyse the cost capitalisations and make sure that they are compliant with the government laws and regulations.
- They pay the other parties like subcontractors, consultants and vendors, and issue purchase orders and invoices.
- They review all the details of the construction budget and hold regular accounting meetings with the construction management team to ensure the smooth running of all the ongoing and upcoming projects.
- Construction accountants investigate the project variances and communicate these reports with the project managers.
8 tips for hiring the best accountant for your construction firm:
The process of hiring the best accountant for your construction firm can feel overwhelming, but with the following tips, this whole process will become a lot easier:
1. While anyone can become an accountant without any qualifications, it is always recommended to hire a qualified accountant having accreditations from recognised institutions, like:
- The Institute of Chartered Accountants in England and Wales (ICAEW)
- The association of Chartered Certified Accountants (ACCA)
- Institute of Financial Accountants (IFA).
This will allow you to enjoy the benefits of maximum protection against any potential risks.
2. A construction accountant must be able to efficiently operate the tax and accounting software required to manage a construction business.
Accounting software helps in the automation of routine tasks, which leads to better management and smooth functioning of the firm.
3. To effectively perform all the duties and responsibilities, a construction accountant must have the following skills:
- Accounting skills
- Problem-solving skills
- Leadership skills
- Business analysis skills
- Cost analysis skills
- Organisation skills
- Communication skills
4. It is preferable to hire an accountant who has a background and relevant experience in construction accounting.
5. While working in a construction firm, most accountants charge on a monthly basis.
The fees of a construction accountant can start from £85 per month depending on various factors like:
- The size of your firm
- The needs and requirements of your firm
- The number of employees in your firm
- Services provided by the accountant
- Number of transactions
- Number of projects
- Services required
6. It is essential to hire a reputable construction accountant for your firm. A good reputation of the accountant will add value to the reputation of the firm also.
7. Some of the questions that you can ask during the interview process to assess the competency of the accountant are:-
- What qualifications do you hold?
- What is your background in construction accounting?
- Are you a member of a professional accounting body?
- Do you charge monthly or on a project-by-project basis?
- What is your fee structure?
- What are the accounting services provided by you?
- What are your thoughts on CIS and the domestic reverse charge on VAT?
- Is professional indemnity insurance a part of your protection?
- What is your practice's level of responsiveness?
- How well versed in construction accounting software are you?
8. Before hiring an accountant for your construction firm, it is essential to meet the accountant in person or a video call. This can help you to assess whether you will be able to work with the accountant on a long-term basis or not.
The process of hiring an ideal and trustworthy accountant for your construction firm may be time-consuming, but it will benefit your firm in the long run.
The right accountant can save you from all the headache that comes with construction accounting. Construction accountants reduce the firm's tax burden and provide you with the best advice that can prove to be invaluable for the growth of your firm.