Construction accounting

Properly conducted construction accounting is for every constructor an important means of cost control for his construction project. In construction accounting, there are parallels to running a business. For a successful business always has properly conducted accounting. Thanks to this, the managers always know how their business stands financially and may take measures in good time. What such accounting looks like is clearly prescribed, yet in construction accounting this is not the case, however. For there are clear rules for construction accounting, even though a construction project is nothing else but a business. With the difference that it only exists temporarily for a set time (during the time of construction). Therefore it is essential that those involved and especially the constructor know where they stand financially.

In reality, the case is often different, so that construction accounting is not complete and fully up to date. Typical examples are invoices, paid directly without the knowledge of the leading architect, and only accounted for very much later. Under some circumstances, this can lead to cost overruns, as the architect therefore assumes that he has more money available. Even orders and modifications, which are carried out, but not correctly recorded in the construction accounting, often lead to cost overruns.

For construction accounting, financial accounting is essential as a model. The following basic rules should be followed:
• Proper construction accounting must be complete at all times. This involves accounting for and documenting all payments.
• For (provisional) construction accounting, those invoices which have not yet been issued are provisionally accounted for and correspondingly marked for easy recognition.
• Proper construction accounting should be carried out as promptly as possible. Only in this way can problematic deviations from the planned costs be recognised in a timely manner.

• Proper construction accounting depicts reality. Meaning that all corrections and adaptations to the project are also comprehensible during the construction accounting.
  
• Proper construction accounting lists all payments - also those settled by third parties, including those by the constructor.
  
• Financing is not a part of construction accounting. The construction finance costs, however, are treated as expense items, as they are a part of the whole finance expenditure.
  
• Proper construction accounting not only depicts the past and present, but also the future. Correspondingly, it also represents a current end of year forecast of construction costs - a very important element for the constructor.

The advantages of construction accounting carried out in real time are obvious: fullest control over the current costs.