If construction reporting was simple as Revenue – Expense = Cash, we could all open up a spreadsheet and call it a day. But with job costing, bonding requirements, production tracking, burden and overhead, keeping an accurate pulse on a construction company is a lot more complicated. That’s why contractors need accounting and reporting software designed specifically for the industry they work in, and when they’re exploring accounting software solutions, they should expect several important reporting capabilities. Without these “must haves,” contractors will be missing key parts of the picture they need to run their businesses optimally.
Bonding Reports
Not all contractors work with bonding agencies, but then again, bonding reports aren’t just for contractors who do. These reports, like work-in-progress (WIP) or over/under billing, help provide an accurate snapshot of each job’s financial wellness so that contractors can make timely, proactive decisions to keep projects healthy and on-budget. By tracking costs and billings to date against estimates at regular intervals, bonding reports can show contractors whether they’re ahead or behind on their billings relative to actual costs and percent complete. Of course this also means that this single report provides other useful key data in one place, like revised contract amount, current profit, percent complete, etc.
Contractors often hire accountants to produce WIP reports annually to help represent the company’s financial position to banks or investors, but running over/under billing reports monthly allows contractors to address under-billings (which could cause serious cash-flow problems) or adjust over-billings (which temporarily inflate the company’s profits). With leading construction accounting applications, these reports generate automatically with transaction data already in the system. Foundation® even calculates recommended general ledger adjustments and can post adjustments right from the report screen with a single click.
For more information on over/under billing and WIP, see our article “Financial Reporting Series: Over/Under Billing.”
Burden Allocation
Standard payroll burden like FICA and workers’ compensation is an essential part of any accounting system, and accounting software for construction should be able to job cost these expenses easily to designated cost categories so they can be tracked separately if desired. But payroll taxes and employer contributions aren’t the only type of labor burden. What about other costs that increase with hours worked, like liability insurance or other overhead? The ability to allocate and job cost additional burden along with more common forms is a “must have” insofar as it lets contractors recognize their true labor costs and estimate overhead with much greater accuracy. Foundation enables contractors to define real or estimated extra burden costs based on either hours worked or wages earned — and set annual or pay-period limits.
Overhead Allocation
The reality is, most construction companies don’t allocate overhead, but without a good overhead allocation system in place to spread office salaries, rent, utilities and more across jobs, contractors aren’t looking at the true cost of their projects. Businesses should work with a construction CPA to decide the best allocation method for them, but the next step will be putting it to practice in a way that’s both convenient and manageable. With Foundation, contractors can choose a job cost method or a general ledger method, as well as being able to allocate overhead through payroll. The built-in G/L Overhead Allocation Report previews the effects of assigning indirect expenses and gives the option to post allocation automatically. With the job cost method, users can view generated overhead before posting, and all allocated overhead appears on job cost reports.
For more information on overhead allocation and reporting, see our article “Financial Reporting Series: Overhead Allocation.”
Cash Flow by Job
A Statement of Cash Flow is easy enough to put together if you know what accounts to add and subtract, but what about looking at cash flows per job? Knowing where the company stands with its availability of cash is certainly important, but being able to monitor the flow of cash by project can help pinpoint where leaks need to be plugged. If left to spreadsheets, these reports require a lot of data to be reentered from numerous areas, and that entails both time and risk of error. With job cost accounting software like Foundation, a cash flow by job report instantly gathers data for any period of time from accounts receivable, accounts payable, payroll (including burden) and job costing (including change orders) to provide immediate answers.
For more information on cash flow reporting, see our article “Financial Reporting Series: Cash Flow by Job.”
Production Reports
Production and project labor reports are like the progress reports we used to receive in school. Before project managers find out their budget passed or failed, they should be able to see where projects might be falling behind or where potential cost overruns need to be addressed. Production reports go beyond basic job cost reporting to show the performance of a measurable task (such as site prep or subsurface work) by quantities completed per labor hour or cost by unit of measure. Not only does this allow contractors to make adjustments while jobs are still active, regular production reporting provides valuable historical data that can help inform better estimates and production forecasts in the future.
Examples of desirable production reports include:
- Labor productivity report to show the number of units completed per labor hour
- Labor unit cost report to show current labor costs per unit
- Unit cost report to show various current costs per unit of measure
- Projected cost analysis to show the projected final cost and units to completion
A user-friendly report designer like Foundation’s built-in DataGenie™ can empower contractors to build the precise production reports most useful for their businesses.
For more information on production reporting, see our article “Production Reporting: Using Job Cost Data to Improve Profit Potentials.”
Can You Really Have It All?
Schedule a live demonstration with a Foundation Software representative to see the kinds of crucial reporting capabilities Foundation offers and to see how it can meet your company’s most basic and complex reporting needs.
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