Balance sheet management is essential for civil construction companies. It provides a snapshot of financial health, guiding decisions on resource allocation, project financing, and expansion. Accurate machinery valuation and meticulous materials vs. labour cost analysis ensure efficient operations, while effective depreciation management enables proactive asset planning. Overall, well-managed balance sheets instill stakeholder confidence, showcasing financial prowess.
Optimise resource allocation for civil construction firms
Expert tax strategies that maximise earnings retention
Wealth building alongside operations ensures long-term financial stability
Given the value of assets commonly found with civil construction it is vital that extra attention is paid to the below information. Reach out to us at Construction Accounting if you need any help.
When it comes to managing machinery values, Construction Accounting ensures your assets are accurately valued and accounted for on your balance sheet. This precision helps you make informed decisions about asset investments and replacements, maximizing efficiency and profitability.
Balance sheet management is vital for civil construction companies as it provides a snapshot of the company's financial health at a specific point in time. By accurately tracking assets, liabilities, and equity, construction firms can assess their liquidity, solvency, and overall financial stability. This information is crucial for making strategic decisions, such as securing financing for new projects, investing in equipment upgrades, or expanding operations. Additionally, a well-managed balance sheet instills confidence in stakeholders, including investors, lenders, and clients, showcasing the company's ability to effectively manage its resources and navigate financial challenges.
Balancing materials and labour costs is crucial for civil construction businesses, and Construction Accounting helps you strike the perfect balance. By analyzing your costs meticulously, they ensure you're getting the most out of your resources while minimizing wastage and inefficiencies.
Depreciation is a natural part of owning assets in the civil construction industry, and Construction Accounting helps you manage it effectively. They ensure depreciation is accounted for accurately, allowing you to plan for asset replacements and upgrades without any financial surprises.
A Civil companies set of accounts must be aligned with their revenue and expense activities but it is also important to get uniformity across the forecasted set of financials.
As with all construction accounting, when designing a set of accounts for a civil company we need to identify the revenue streams that have direct costs associated to them. We can get this information from your quotes and past jobs. We also need to identify any other major revenue streams that we would like to identify separately.
Once we have set up your income accounts we then create the accounts for the direct costs associated with deriving revenue. This is a great way to ensures all of your business operations are individually profitable. For example, you may be delivering goods via a different type of truck, having the income and costs identifiable will allow you to check at the end of the month whether your expected profitability is actually being recognised as your business goes about it's operations.
Lastly we want to ensure that no other variable costs are sitting in our overheads section and vice versa. Commonly we find that management salaries have not been pulled apart from the operating wages. This must be done to ensure a correct reading of the accounts.
This completes the top half of the income statement and the gross profit, this will give you some good insights into the company.
Different forms of profit, balance sheet, tracking categories and timing are discussed below.
We like to show different levels of profit, typically most statements might have net profit and profit after tax. However another good figure is you operating profit or EBITDA. This shows the companies performance before the current ownership structures costs, this can have better comparability over time as the companies capital structure changes.
Due to the higher than normal investment in capital assets it is important to stay on top of your items in the balance sheet. You asset register will show you the value of each individual asset. If however this starts to become under valued, we may need to look at recording the fair value of these assets. If this is not managed a company can become technically insolvent as the companies assets are under represented on the balance sheet, this could result in a damaged credit rating, higher interest costs and a restraint on capital.
Timing is the last key issue for transport companies, we must do our best, sometimes creatively, to align the revenue streams with the costs otherwise we risk throwing out our gross profit. Typically what can happen is that as deliveries are completed and invoiced, the costs like fuel and RUC are not recorded until later. There are a few ways around this depending on the companies structures.
Further breakdown of the income statement can also be achieved through tracking categories, most accounting systems have this extended feature. This is not represented in the above example as it is even more company specific. We do however believe that most construction companies should be utilising this feature.