People’s perception of a builder is a person with deep pockets and a multi-million portfolio of personal properties amidst recurring multimillion dollar contracts with huge margins and great contacts. The people are not to be blamed for this perception since builders and developers have received a lot of media coverage for a whole lot of reasons. As construction accountants, we specialise in property, we know and quite well understand how stressful, time poor and competitive a builder’s life is. Not only the margins are stiff but due to the reliance on trades people and due to their sifting quotes and prices and the time delays the margins a builder trades in are ever more slimmer than ever. The ease of entry into the construction industry makes competition stiff too. The competitive edge that volume builders possess in their arsenal due to a bulk buying power and the ability to retain essential trades on a full time employment contract makes this industry ever more challenging for custom home builders. As your construction accountants, we can not only provide construction accounting advice, but also construction tax planning and tax advice.
The requirement to manage multiple projects and to account for project costs accurately over projects is not only time consuming but a tedious process for builders. We have solutions to make this process much easier and simpler for builders, without using expensive construction project management software. We can do this in house, without you requiring the need to hire expensive on-site bookkeepers for your construction accounting needs.
Managing a construction project is much more than just, permits and licenses. Construction workers usually get overwhelmed with paperwork and accounting and compliance related duties. Most workers within the construction industry are time poor. The construction Industry is vast. Understanding it, staying relevant and maintaining an ongoing business is a challenging and evolving process. It is a critical part of the Australian economy and it supports trades such as labourers, material suppliers, steel and trade industries, technicians, skilled and unskilled workers. Due to involvement of many third party suppliers and providers it is full of complex operational challenges. And an inaccurate estimation, quote or calculation can result in the contract being non-profitable. A delay in recording costs or carrying out bookkeeping or project costing can result in expensive compliance costs and hence choosing and delegating the construction accounting to an experienced construction accountant is a must.
The compliance requirements and taxation add another spin to the complexity of trading as a builder. Although the common belief is that the builder’s margin would be a minimum of 15%, the reality is that some builders end up making about 5-7% on the end value of the project, whilst many end up making losses. It is a fact many builders sometimes fund the project with their personal funds to keep the project going even if this means they will end up making a loss. This is because the consequences of not completing the project may be more cumbersome to deal with that taking a small hit and making a loss.
Some building contracts are quite onerous where the builder sometimes commits to pay a penalty to cover time overruns in the project and this too ends up eating up into the profits of a builder.
Accounting for construction, includes planning, scheduling, financial planning & tax planning. As your construction accountants, the accounting for construction should take into account, cash flow, budgeting, forecasting, investment planning, investment structuring, construction tax advice, construction GST advice. The structure of the entity matters immensely too, since the structure trumps the taxation on the income and the flexibilities afforded with distribution of income too.
There is a long list of rules and regulations which every builder needs to follow and it is overwhelming for builders to carry out their bookkeeping and administration as well. Hiring a bookkeeper will add to the costs. The financial obligation to complete construction GST lodgements and maintaining construction tax payments and construction BAS is another complex task of construction accounting. As accountants for builders & accountants for construction workers, we can help you manage your tax obligations and keep your tracks clear by managing your expenses and by handling your payroll you can focus on the growth of the business.