565: DIY Construction Accounting Errors And Ways To Improve Your Practices

This Podcast Is Episode 565, And It's About DIY Construction Accounting Errors And Ways To Improve Your Practices

Many small construction business owners tend to handle their accounting and bookkeeping, especially when they've just started. However, keeping track of the finance side of the business– everything from income to expenses to tax compliance– can be overwhelming.

 

Mistakes can happen quite quickly and can have costly consequences for your business. Below are five of the most common Do-It-Yourself accounting errors you should avoid.

 

1. Unorganized Records

It takes excellent organizational skills to do your bookkeeping and accounting right. You must record every transaction, keep receipts or digitize them for future reference, calculate taxes accurately, and more. If your records are not kept organized and updated, you'll likely miss something, which could get you into trouble during the tax season.

2. No Accounting Schedule

As a construction business owner, there are many other things you need to attend to, and accounting can easily be pushed to the bottom of your seemingly endless To-Do list. Yet, setting an accounting schedule to add your recent income and expenses into your records is extremely important. If daily updating is not possible, at least dedicate some time once a week to do your accounting.

3. Unreconciled Accounts

Regularly check if your bank account reflects the same balance as you record your cash flow and other financial data in your books. If you find a gap, there is likely a mistake somewhere that you need to find or even a fraudulent transaction. Taking immediate action will help you prevent worse problems further down the line.

4. Failing to Take Into Account Small Transactions

It can be easy to forget about minor transactions, such as the office supplies you picked up on your way to the office or the freebie you sent a loyal customer. However, no matter how small you think the transaction is, keeping a record and getting a receipt is essential. In case of a tax audit, you will need to be able to present records of ALL business expenses, even these small ones.

5. Not Backing Up Data and Using Accounting Software

Imagine if the laptop where you store all your financial data was stolen, lost, or broken beyond repair, and you don't have a backup. You need to redo everything from scratch, which could be a massive waste of time.

If you're still using a spreadsheet or paper ledger to keep track of your business finances, you might consider upgrading to a cloud-based accounting software such as Xero or QuickBooks. By migrating to the cloud, you can easily back up your accounting data and access them wherever and whenever necessary. 

These cloud-based accounting systems integrate well with your bank account and other valuable construction business apps. The results are streamlined processes, less manual work, enhanced efficiencies, and better overall business performance. 

Spend Less Time on Your Books and More Time on Your Business

While being aware of these common accounting mistakes could help you avoid them, the most convenient and efficient way to stay on top of your business finances is to entrust your accounting to the experts. Our team of experienced accountants can integrate the most suitable cloud accounting software for your business and even train your in-house staff on its proper implementation.

I admit that small business owners - like myself have learned to make the most of our resources. As an entrepreneur, I tend to take on the challenge of wearing multiple hats, managing your business, answering phone calls, responding to emails, and scheduling appointments. However, I am reminding you now that being a construction company owner and doing your accounting and bookkeeping requires a different skill set from being a construction expert in your field.