At Foundation Accounting & Consulting, we view bookkeeping as the organized process of categorizing every financial transaction, from purchases to deposits, to create a clear picture of your finances. We set up a chart of accounts—much like arranging items into designated buckets—to ensure that every expense and income item is recorded correctly. In this article, we explain how we integrate systems like QuickBooks to manage job costs, track detailed expenses, and maintain accurate financial statements, providing a systematic approach that supports your business operations.
What is Bookkeeping
I define bookkeeping as organizing every transaction—whether it’s a purchase, deposit, or any other financial activity—by placing each into its proper category, much like sorting ping pong balls into designated buckets.
Setting Up a Chart of Accounts for Construction
I view the organized array of categories, similar to the buckets I mentioned earlier, as what we call a chart of accounts—a systematic framework for classifying financial transactions. To set it up for effective bookkeeping, I start by clearly delineating each category, ensuring every transaction finds its proper place in the financial records. That’s what I’ll do exactly: set up the basic accounts you need. Beyond that, it depends on your industry and how you operate. One great advantage of QuickBooks—and it’s true with other software as well—is that when a new transaction occurs, I can immediately create a new account to classify it differently. So, for example, if you haven’t done advertising and marketing before and suddenly start marketing, you can create a marketing account right on the spot.
I find it useful to compare different types of accounts to various colors of M&M’s—each color representing a specific account type. First, there’s direct labor, which covers employees working directly on the job rather than in the office. Next is direct materials, which include any materials purchased for the job. I also include other direct costs, such as subcontractors and rental equipment expenses. Overhead represents all the additional costs contributing to completing work but cannot be tied to a single customer. For example, an insurance bill is allocated proportionally across all jobs. Finally, selling, general, and administrative expenses cover items like marketing, advertising, sales commissions for office staff, and utilities.
Tracking Job Costs and Project Expenses
Job costing can be seamlessly integrated into the bookkeeping process. For example, when using QuickBooks, you can assign a customer name to each transaction, which makes tracking all direct costs related to a specific job straightforward and efficient.
An essential component for refining job costing involves incorporating detailed entries through QuickBooks’s products and services feature. This functionality allows for granular categorization—rather than lumping all subcontractor work into a single category; you can separate specific roles, such as a concrete subcontractor. Each detailed product and service is then linked to an account in the chart of accounts. This link means you could have multiple revenue items that all consolidate into one service income account on your profit and loss statement, providing both detail and a clear overall view when needed.
Invoicing and Accounts Receivable Management
Invoicing, accounts receivable, accounts payable, and billing tasks are integral to the bookkeeping process. In essence, bookkeeping involves recording all these transactions in your software. Even though larger companies might handle AR and AP in separate accounts, all these elements collectively contribute to compiling your financial records.
Preparing Financial Reports and Analysis
A bookkeeper must deliver clean, well-prepared financial statements—ensuring, for instance, that negative numbers (typically indicative of mistakes, aside from a few exceptions) do not appear on the reports. Issues such as negative figures, undeposited funds, or unapplied cash payments signal something is amiss. Ultimately, the bookkeeper ensures that all transactions are accurately recorded to produce reliable financials.
Conclusion
At Foundation Accounting & Consulting, our approach to bookkeeping provides clarity and precision across every facet of your financial operations. By setting up a robust chart of accounts and utilizing systems like QuickBooks, we efficiently track job costs, manage invoicing and accounts receivable, and produce reliable financial reports. Our systematic process ensures that every transaction is accurately recorded, giving you confidence in your financial data and the assurance that your business records are in expert hands.
Gain clarity and confidence in your financial data with our expert bookkeeping services—let Foundation Accounting & Consulting handle your bookkeeping services today!