Guide to general accounting for construction companies
Construction companies are the most difficult fields for accountants to handle. Construction accountants not only manage records, documents, books, etc., but also have to account for basic operations and carry out accounting management according to construction projects and materials extraction,…So what are the steps in the accounting process for construction companies that need attention and what issues often cause unwanted errors? Let’s find out with Smart Solutions For Business Company Limited(S4B Vietnam) in the following article.
1. Specific factors of construction companies need to pay attention when accounting
Basically, operations related to revenue and expenditure, debt, etc. are accounted for similarly to commercial and production accounting. The key difference here is how the accountant must collect costs and calculate costs. The differences between construction accounting and commercial accounting include the following factors:
1.1 Subjects costing:
- According to the project: Costs only arise once, not repeated.
- The detailed cost of a project is often divided into many categories including: bidding packages, sub-projects, etc. Therefore, the cost calculation can be calculated according to the detailed cost and aggregated to the cost of the parent project.
1.2 Follow-up time: Usually lasts a long time, can be one year or many years.
1.3 Cost collection object: Cost collection by project.
1.4 Cost factors for a project include: Raw materials, Labor costs, general costs, construction machine costs, subcontractor costs, outsourcing costs.
- Raw materials: are often imported and exported directly to the project (usually rarely through the warehouse because we know the exact volume of each raw material through weight removal). Materials can also be transferred between projects.
- Research costs, construction machinery, subcontractors, general costs, and outsourcing costs depend on the specific work that arises. These costs can be designated by project or allocated to projects. Allocation is usually based on raw material costs
1.5 For unfinished costs: Construction accountants, collect them in account 154 and transfer them to account 632.
1.6 Bank loan interest: Most construction companies will incur bank loans to serve construction. These loans will be granted to construction teams in the form of project advances.
1.7 Project estimate table: When bidding for a project, there will be an estimate table for the project and we will have to prepare a comparison report between the estimated cost and the actual cost.
1.8 Determining profit and loss: Allocating Sales expenses and Enterprise management expenses by project to determine business results by project
Current VAT outside the province: Construction projects outside the province (value >=1 billion) will incur current VAT outside the province.
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2. Common problems that businesses encounter need to be noted
The following is a summary of some problems that businesses often encounter. You can compare it with your business.
a. Regarding direct material costs
- The quantity of raw materials used for the project is less than the estimate or there is too much
- Raw material invoices often arrive late compared to construction progress (purchased raw materials but no invoice arrives immediately).
- Bringing exported raw materials to the project does not match the construction schedule
b. About Labor Costs
- The CPNC collection is much lower than the estimate or too much compared to the estimate
- Documentation procedures for workers are not guaranteed
- Procedures related to personal income tax are incomplete
- Regarding general costs, there are often errors
- There are many general expenses incurred, but due to the nature of the construction, many expenses are difficult to get invoices for
- The collective overhead costs are much lower or much higher than the estimate
c. Other errors
Issuing invoices at the wrong time: The time of issuing invoices needs to be based on the Acceptance Minutes of the project or construction item.
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3. Financial management – corporate accounting builds optimal performance with Smart Solutions For Business Company Limited(S4B Vietnam)
Construction enterprises have many characteristics in financial and accounting management issues. To meet these special requirements, accounting plays an important role in enhancing efficiency and ensuring accuracy of the financial and accounting management process. Understanding the needs of construction businesses, Smart Solutions For Business Company Limited(S4B Vietnam) has accounting consulting solution with many features to meet the needs and characteristics of construction businesses:
In addition, Smart Solutions For Business Company Limited(S4B Vietnam) also has many features and utilities to help corporate accountants carry out their work with high efficiency and great efficiency. Smart Solutions For Business Company Limited(S4B Vietnam) accounting for construction businesses not only helps enhance financial and accounting management but also helps optimize work processes, minimize errors and increase efficiency.
S4B Vietnam
- Address: Unit 701B-701C, Tower A, Handi Resco, 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam
- Tel: + 84 24 3974 4181
- Email: service@s4b.com.vn
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