Small contracting companies have different needs than large firms in terms of project size and team numbers, but they equally need an accurate accounting system that matches the nature of their work. This article covers the key aspects to consider.
The Unique Nature of Small Contracting Accounting
- Limited specialized accounting human resources.
- Multiple small concurrent projects instead of one large project.
- Heavy reliance on temporary labor and subcontractors.
- The need to track actual cost against the planned budget for each project.
Basics of Project Management from an Accounting Perspective
Setting a Clear Budget for Each Project
Before starting any project, a detailed budget should be set covering materials, labor, and administrative expenses.
Recording Actual Costs Promptly
Recording costs immediately helps compare them against the planned budget and detect any deviation early.
Tracking Progress Payments
Even in small projects, progress payments need accurate tracking to ensure continuous cash flow.
Calculating Profitability After Closing Each Project
After each project ends, actual cost should be reviewed against revenue to know the true profit margin.
How Does Riv-ERP Help Small Contracting Companies?
Riv-ERP provides a simple interface for creating a cost center for each project without needing deep accounting expertise, with clear reports that automatically compare planned budget against actual cost.
Additional Tips for Small Contracting Business Owners
- Don’t rely on memory or paper records to track project costs.
- Separate the accounts of each project to avoid mixing costs.
- Review financial reports weekly, not just at the end of the project.
Conclusion
Success in the small contracting sector depends heavily on accounting accuracy, and with Riv-ERP, owners of these companies can manage their projects with greater confidence and clarity.
