Construction Accounting is unique
in both its preparation and ongoing management.
If a construction business is to
accurately report on its financial position, a number of adjustments will need
to be made to what would be considered standard accounting practice.
In a standard accounting process,
the business looks at its income and expenses and determines a gross profit,
deducts items such as overheads and determines a net profit. At the end of each accounting year, income
statements and profit are returned to zero and the process starts again. Due to the nature of the construction
business and the fact that projects are likely to span more than a single
financial year, income and expenditure accounts cannot be zeroed as the overall
profit/loss of a project will relate to all costs and expenditures versus total
payments throughout the project cycle, from end to end, and cannot be
restricted or determined by the financial year.
This is where CCS BuildSmart delivers and provides a separate reporting
line that reports on all the elements of cost and revenue associated with
individual projects throughout their lifecycle and is known as the Cost Ledger.
Reporting on Profit and Loss
for Construction and Building Companies is
linked directly to the stage or percentage of completion of the project rather
than being a simple cost of sale compared to value of sale calculation. This is as determined internationally under
If the accounts were zeroed at
the end of a financial reporting period, the business would not be able to
relate the profit/loss to the completion stage of individual projects where
(and which is usually the case) the projects are running over a number of financial
When looking at ‘percentage
we need to consider the final estimated cost and revenue as compared
to the estimated cost and revenue to date and not only in the reporting year in
question. Again, CCS BuildSmart in
conjunction with CCS Candy provides the reporting capabilities on a project
Calculating project cost
considers elements that would not usually impact traditional assessment of net
Elements peculiar to the
construction and building industry such as workshop cost, internal repairs and
plant will affect the project cost to date and therefor the real profit and
loss for a project. CCS BuildSmart
caters for this by providing additional bespoke elements such as Plant Manager
and Workshop Manager.
Management and separation of
Internal Costs will allow them to be apportioned to individual projects thus
removing them from the overhead expense accounts. In addition to the Cost
Ledger, and the Plant Ledger, CCS BuildSmart also creates specific reporting
and allocation of Overhead Expenses into the 'Overheads Ledger' to be applied
at project level.
Managing the use and ‘life
expectancy’ of equipment and plant machinery
is another peculiarity CCS BuildSmart
will assist you with. Factoring in depreciation
as part of the cost to date will allow not only for the true cost of the construction
but also manage the plant and equipment itself in terms of both effective utilisation
and (where necessary), replacement. To facilitate the management of plant and
equipment costing, CCS BuildSmart separates the Plant and Equipment into the
Both CCS Candy and CCS BuildSmart
were developed and improved on a global stage and were built with a full
working knowledge and understanding of Tax and how to apply tax bands, VAT, limits,
exceptions to the integrate accounts, throughout the construction world.
Where the tax environment changes, CCS’s Candy
and BuildSmart are able to adapt as they have the full functionality to operate
anywhere in the world and the user is only required to enter the type and rate
of the tax applicable to the country of operation.
When considering whether the
construction estimating and project management system you are using or thinking
of using is suitable for handling VAT, make sure it is robust and adaptable to
that as well as all other forms of taxation but, equally or more importantly,
that it is developed and fit for purpose within the construction industry.