Builder’s Accounting Close Roadmap

Making decisions with accurate and relevant information has given builders a significant competitive advantage in today’s market. The construction industry has experienced significant volatility in recent years, forcing builders to make up-to-date decisions with out-of-date information. Working with older financial data is irrelevant in a volatile industry and can influence a builder to make incorrect decisions. Speeding up the accounting close process is a vital contributing factor to giving decision makers more relevant information.

Below is a roadmap for builders to close their accounting books and produce financial statements. Following a defined roadmap is critical to speeding up the accounting close process.

Interested in accessing our Free Builders’ Accounting Close Checklist? Request Your Copy.

Record Transactions

Start on the income statement with revenue, ensuring progress bills to clients are issued and recorded, and closings of jobs are recorded.

Next, “Move Down” the balance sheet, starting with bank accounts and working through asset and liability accounts. For builders, this can include but not limited to:

• Bank: All transactions are entered correctly.
• Accounts Receivable: Client invoices issued are recorded. Client payments are recorded.
• Work in Process (WIP): Direct costs to active jobs as of the end of the period are included in WIP. Direct costs to jobs closed as of the end of the period are reversed and included in COGS.
• Client Deposits: Client deposits received and closings, customer deposits returned are recorded.
• Accounts Payable: Vendor bills received are recorded. Vendor bills paid are recorded.
• Credit Cards Payable: Transactions are recorded.
• Payroll Liabilities: Employee wages, benefits and payroll taxes are recorded.
• Loans Payable: Loan payments are recorded, bifurcating interest expense versus loan balance reductions.
• Equity: Record contributions and distributions by owner

Record Other Entries

Other entries for a builder include:

• Accruals for income earned but not yet received (i.e. percentage of completion)
• Unearned Revenue: Income received but not yet earned
• Expense Accruals for expenses incurred but bills not yet received
• Depreciation of Fixed Assets
• Amortization of Prepaid Expenses

Transaction Review

Review each account’s subledger and ensure transactions are properly recorded to correct jobs/cost codes/accounts.

Account Reconciliations

Reconcile all asset and liability account ending balances to supporting documents. Below are common items to reconcile against:

• Bank: Ending Balance on the month-end bank statement.
• Accounts Receivable: Total of all invoices issued to clients and not paid.
• Work in Process (WIP): Total direct costs associated with active jobs not yet closed.
• Client Deposits: Total deposits associated with active jobs not yet closed.
• Accounts Payable: Total of all bills received from vendors and not paid.
• Credit Cards Payable: Ending Balance on the month-end credit card statement.
• Payroll Liabilities: Balance reflects total payments outstanding to employees/benefit programs/payroll taxes.
• Loans Payable: Record loan draws and payments, bifurcating interest expense versus loan balance reductions.

Financial Reporting

Generate the relevant reports for stakeholders. This can include:

• Financial Statements:
  • Income Statement
  • Balance Sheet
  • Statement of Shareholder Equity
• Budget vs Actual Reports, Variance Analysis including commentary
• Job Cost Reports

Finalizing, Communication

• Share financial reports and performance insights with stakeholders.
• Ensure financial data is properly backed up and store financial reports.