Construction accounting can be a complex process, but with the right certification and understanding of best practices, entrepreneurs can ensure that their construction business is running smoothly. In this article, we’ll discuss construction accounting certification, common methods of construction accounting, and best practices for construction accounting. We’ll also explore some of the most popular accounting certificates available and how they can benefit construction businesses.
Common Methods Of Construction Accounting
There are four types of construction accounting: cash basis, accrual basis, completed contract method (CCM), and percentage of completion method (PCM).
- Cash basis construction accounting records revenue and expenses when cash is exchanged. This is the simplest method of construction accounting and is often used by smaller businesses.
- Accrual basis construction accounting records revenue and expenses when they are earned or incurred, regardless of when cash is exchanged. This method provides a more accurate picture of a business’s financial health.
- Completed contract method (CCM) construction accounting recognizes revenue only after a project is completed. This method is typically used for projects that span multiple years and can be complex to manage.
- Percentage of completion method (PCM) construction accounting recognizes revenue as a project progresses. This method is often used for large projects with long timelines.
Best Practices For Construction Accounting
There are a few best practices that construction businesses should follow to ensure accurate accounting:
- Establish a system for tracking job costs. This system should include all direct and indirect costs associated with a project, such as materials, labor, time, overhead, and financing.
- Use software designed explicitly for construction accounting. This software will help construction businesses track job costs, manage billing and invoices, and generate reports.
- Manage change orders carefully. Change orders should be tracked separately from the original contract and should only be approved if they are necessary.
- Hire an experienced construction accountant. This professional can help construction businesses set up an effective accounting system and ensure compliance with applicable laws and regulations.
- Or get certified in construction accounting.
Certifications In Construction Accounting
There are many different types of accounting certificates available, but not all are relevant to construction businesses. The most popular certifications for construction leaders include:
Certified Construction Manager (CCM)
The CCM is a professional designation awarded by the Construction Management Association of America (CMAA). To earn the CCM, construction managers must have a minimum of four years of construction experience and pass an exam.
Certified Public Accountant (CPA)
The CPA is the most popular accounting certification. To earn the CPA, accountants must pass an American Institute of Certified Public Accountants (AICPA) exam.
Certified Cost Engineer (CCE)
The CCE is a professional designation awarded by the American Society of Cost Engineers (ASCE). To earn the CCE, cost engineers must have a minimum of four years of cost engineering experience and pass an exam.
Certified Construction Accountant (CCA)
The CCA is a professional designation awarded by the American Institute of Certified Public Accountants (AICPA). To earn the CCA, construction accountants must have a minimum of four years of construction accounting experience and pass an exam.
Certified General Contractor (CGC)
The CGC is a professional designation awarded by the American Contractors Association (ACA). To earn the CGC, general contractors must have a minimum of four years of construction experience and pass an exam.
Certified Professional Constructor (CPC)
The CPC is a professional designation awarded by the American Institute of Constructors (AIC). To earn the CPC, construction professionals must have a minimum of four years of construction experience and pass an exam.
As you can see, a lot goes into accounting for construction businesses. If you run a construction business, you should ensure you use the best practices and methods for construction accounting. You should also consider getting certified in construction accounting to improve your accounting skills and ensure compliance with applicable laws and regulations.