When to Hire a Construction Accountant

As your construction company grows, accounting and financial management get more complicated. While a traditional CPA can be helpful, they often lack the specialized knowledge required to handle the needs of the construction industry.

Working with a construction accountant can have an enormous impact on your company’s profitability, growth potential and overall success.

Let’s explore how partnering with a CPA specialized in construction accounting can transform seven common industry challenges into opportunities for financial optimization and business growth.

Challenge 1: Navigating Complex Long-Term Project Accounting

Construction projects often span months or years, making accurate financial tracking a formidable task. For example, many companies struggle with maintaining precise job costing and work in process (WIP) schedules, leading to misallocated resources and inaccurate profit projections.

A construction CPA brings expertise in project-based accounting methods tailored to the unique challenges of the construction industry. They’ll help you implement robust job costing systems that track expenses and revenue at a granular level, ensuring each project’s financial performance is accurately represented.

This level of detail allows for:

• Real-time cost monitoring to prevent overruns
• Accurate profit forecasting for ongoing projects
• Improved resource allocation across multiple job sites
• Early identification of potential financial issues

By giving you the tools to maintain detailed WIP schedules, construction CPAs unlock the ability for your business to benefit from real-time insights into project progress and profitability. As a result, you can make informed decisions about resource allocation, project timelines and more — ultimately improving your bottom line.

Challenge 2: Creating Clear, Industry-Specific Financial Reports

Standard financial statements often fall short in capturing the nuances of construction operations. Construction CPAs often excel at creating financial reports that accurately represent your company’s financial position, considering factors unique to the industry such as:

• Retainage: Properly accounting for held-back payments and receivables
• Change orders: Tracking modifications to original contracts
• Percentage of completion: Accurately reflecting project progress
• Equipment depreciation: Accounting for heavy machinery and tools

These tailored reports not only provide an accurate picture of your company’s financial health but also prove invaluable when communicating with project stakeholders.

Clear, comprehensive statements can significantly improve your ability to:

• Secure financing from banks and investors
• Enhance bonding capacity
• Win bids by demonstrating financial stability
• Negotiate better terms with suppliers and subcontractors
• Make informed decisions about business growth and expansion

Challenge 3: Optimizing Tax Strategies for Construction

The construction industry is subject to complex tax regulations, including specific methods for recognizing income and expenses. An experienced construction CPA can bring in-depth knowledge of industry-specific tax strategies.

This experience allows them to recommend the most advantageous approach to grow your company, potentially leading to substantial tax savings. For instance, they might:

• Identify opportunities to defer income recognition
• Accelerate expense deductions
• Maximize available tax credits and incentives
• Ensure compliance with state and local tax regulations

These efforts could result in significant tax savings while maintaining compliance with IRS regulations.

Challenge 4: Strengthening Bonding and Surety Relationships

Securing bonds is often crucial for winning construction contracts, especially in public sector work. Construction CPAs understand the critical role that financial presentation plays in bonding capacity and rates. They work to strengthen your financial statements, presenting your financial information in a manner that highlights your company’s strengths. This helps:

• Increase your bonding capacity
• Secure more favorable bond rates
• Improve your ability to bid on larger projects
• Build stronger relationships with surety providers

The expertise of construction CPAs can directly translate into your ability to take on more lucrative contracts and grow your business.

Challenge 5: Managing Cash Flow in a Project-Based Environment

Construction projects often involve significant up-front costs and delayed payments, which put pressure on your company’s cash flow. Construction CPAs are adept at creating detailed, accurate cash flow projections tailored to the cyclical nature of construction work. They consider factors such as:

• Retainage schedules
• Progress billing cycles
• Seasonal fluctuations in work volume
• Equipment purchase and lease payments

By providing precise forecasts, they enable you to:

• Anticipate and prepare for periods of tight cash flow
• Optimize working capital management
• Negotiate more favorable payment terms with suppliers
• Implement efficient billing and collection practices

These strategies can help ensure your company maintains a healthy cash position, even during challenging periods.

Challenge 6: Leveraging Technology for Financial Efficiency

The construction industry has seen a rapid increase in software solutions developed for your unique business needs. The specialized nature of the construction CPA’s role allows them to stay informed on the latest technology trends of your industry.

As a result, they can recommend and help implement construction-specific accounting and project management software that integrates seamlessly with your operations. These specialized tools can:

• Automate job costing processes
• Streamline payroll management for multi-state and union workers
• Enhance equipment tracking and utilization analysis
• Improve overall financial reporting accuracy and timeliness

By leveraging the right technology, you can significantly improve efficiency in your financial processes — freeing up time and resources for strategic decision-making.

Challenge 7: Gaining a Competitive Edge Through Industry Benchmarking

Construction CPAs maintain fluency with industry benchmarks and performance metrics unique to the industry. Because of this, they can provide comparative analyses that show how your company stacks up against peers in areas such as:

• Profitability ratios
• Labor productivity
• Equipment utilization rates
• Overhead cost management

You can use these insights to:

• Identify areas where your company excels
• Pinpoint opportunities for improvement
• Set realistic performance goals
• Make data-driven decisions to enhance competitiveness

For example, a construction CPA might help you realize that your equipment utilization rate is below industry average. This could prompt a reevaluation of your asset management strategies.

Choosing the Right Construction Accountant

When selecting a construction CPA, consider these key factors:

1. Industry expertise: Look for a firm like James Moore that has extensive experience in construction accounting. This ensures a deep understanding of industry-specific challenges and regulations.
2. Range of services: A comprehensive set of service offerings — including tax planning, auditing, financial reporting and business advisory services — ensures your new construction accounting partner can meet all your financial needs, even if those needs shift later.
3. Technology integration: High-quality accounting firms like James Moore have the capacity to leverage cutting-edge construction accounting software and technology solutions to serve their construction clients. This ensures more efficient and accurate financial management.
4. Proactive approach: Don’t simply look backward in your accounting practices. Seek an accountant who takes a proactive stance in identifying new opportunities and potential issues (rather than simply reacting to problems as they arise).
5. Client education: Work with a firm that prioritizes educating clients on financial best practices. This demonstrates their commitment to your long-term success.
6. Industry connections: An accountant with strong connections in the construction industry can provide valuable networking opportunities and insights into market trends.
7. Scalability: A well-resourced firm like James Moore can accommodate your needs as your business grows, offering scalable solutions that evolve with your company.
8. Communication skills: Clear, timely and effective communication is crucial for a successful partnership with your accountant.

These eight success factors can act as a firm foundation as you establish a relationship with your outsourced construction accountant while also setting you up for success in the future.

Partner with James Moore for Expert Construction Accounting

Don’t let generic accounting hold your construction business back. Specialized construction accounting aligns your business’s financials with the reality of your business. This in turn gives you the resources to win better contracts and keep growing.

James Moore’s team of expert construction CPAs can help you navigate the complexities of the construction accounting matters and chart a path to growth. Contact us today to get started.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.