Construction accounting is what? The business & accounting phased works

Due to the peculiarities long construction costs incurred dispersion as well as the payment according to each stage, many construction enterprises are still having difficulty in accounting for expenses, valuation of revenue recognition, the proper states. The deviations in this easy financial data is not accurate, affect the cash flow management and effective works.

The same Lac Viet Computing find out details about the peculiarities of accounting, the profession should be noted, how accounting construction company efficiency. Through that help businesses to control financial risks, improve efficiency and project management.

1. Construction accounting is what?

Construction accounting is a professional track, record and analyze the entire cost, revenue, cost, business results arise throughout the construction process, the construction work. This work entwined with each work item, the contract of each stage of acceptance and settlement.

Compared to the type of accounting other accounting construction company, there are many other points distinctly, shown through the comparison table below:

Therefore, the core objective of accounting construction company not only in the proper recognition, not enough data, but also plays an important role in the administration, cost control, cash flow and assess the effectiveness each work. At the same time, direct support for the work of the executive, the decision of the business.

2. Job description construction accounting in business

2.1 construction accounting do the work?

accounting construction company role to play in monitoring costs, construction schedule, ensure financial data reflect the actual works such as:

• Track the cost of each work: accounting set cost according to each work item, the phase of construction, including materials, labor, machine construction and general expenses public school. Closely monitor helps control the disparity estimation, as well as adjust the timely construction process.
• Reporting on cost, profit and loss statement works: On the basis of cost have gathered, accounting perform the calculation of the price of the work completed or the price according to the volume of test. The reported gain – as each work is an important basis for leadership effectiveness evaluation project, construction capacity, as well as profitability.
• Coordinate with engineering department, board command works: accounting't work independently, which must often coordinate with technical command works to collate volume, tempo, norm private profile test. This cooperation helps accounting data reflect actual construction.

Full implementation of this helps to control the cost effectively, provide the basis of reliability for the evaluation results of each work.

2.2 Skills & competencies required of construction accounting

Accounting construction companies need to have professional knowledge combines the skills in accordance with the peculiarities of construction, cash flow management project.

• Understand the nature of construction costs: understand how cost from materials, labor, construction machines to the cost of general public schools, through which properly classify costs, reduce errors, as well as timely warning risk exceeded the plan..
• Ability to analyze data & financial projections: Not only recorded data, accounting, need to compare the actual costs with the estimates, forecasts, cash flow analysis and fluctuations in the cost to serve the financial planning, performance evaluation works.
• Use software tool that supports accounting: software help automate accounting, data integration related as well as reduce errors manually. Thereby improving the accuracy, timeliness of accounting information.

When well meet the power on, the accountant can provide reliable data support executive management works more efficiently.

3. Peculiarities of accounting in construction business

In financial activities, construction, accounting not only record data, but also to support cost management as well as effective project. Due to special long-term projects, great value and cost of distributed, service has many differences compared to other sectors.

• Production cycle long & value great works: construction projects often have cycles of construction, lasting through many states, accounting makes accounting to track costs and revenue, as well as cash flows in a long time.

So, accounting and valuation of phased construction is the key requirement, which helps to reflect promptly actual situation, support, evaluate the effectiveness of the active control financial risk.

• Construction under the contract, acceptance & payment according to each stage: In the construction industry, the revenue/expense is recorded in the progress of experience, acceptance, payment and each stage instead of waiting until construction is completed.

So accountants need to track costs under the contract, confirm the mass acceptance, as well as revenue recognition, the right time prescribed accounting – tax. Recorded at the wrong time can distort the results of the business, especially with the project value.

• Cost scattered in many works, more categories: construction Business usually deployed at the same time many works, each work consisting of many items in different locations, making the cost dispersion difficult to control.

This requires accounting aggregates expenses according to each work, allocation of common costs reasonable, compared with the estimate. At the same time, for projection profile technique with accounting data helps financial statements properly reflect reality.

• High financial risk if not tightly control costs & cash flow: When the cost and cash flow are not effective control, construction business to exceed estimates, interrupt cash flow due to experience slow as well as effective lower construction plans.

Besides, fluctuations in prices of materials, labor, cost of construction machines that cost easy to developments requiring accounting must timely, flexible to properly reflect the financial reality of the project.

4. The accounting profession popular building in business

In addition to mastering the principles basic accounting, business, construction accounting longer have to handle many services directly related to the cost and each work. This not only ensures record accuracy, but also is the webmaster tools is important to help control costs, financial forecast, as well as the optimal profit.

4.1. Cost accounting materials and construction

Raw materials are often accounted for a large proportion in the cost of construction projects can be up to 40-60% of the total cost depending on the type of construction, scale. The work of the accountant in business is this:

• Recorded cost of raw materials when used for each work, each item.
• Track material inventory reports, deficiency or excess in comparison with norm the original estimate.
• Coordination of information between the school, parts warehouse to ensure the raw materials used for the right purpose.

Closely monitor the cost of raw materials to help businesses limit the losses due to damage, loss or misuse, and create a data base to compare the actual cost with the norm estimate. From there, businesses can timely adjust the plan on finishing the draft for the next project.

Accounting purchase:

• Buy warehouse:
  Debt TK 152 – Detailed supplies
  Debt TK 133 – VAT deductible
  Have TK 111/112/331
• Buying and straight at the school (not through the repository):
  Debt TK 621 – MATERIAL Cost direct (Detail work)
  Debt TK 133 – VAT deductible
  Have TK 111/112/331

Accounting adjust inventory when inventory end of period:

• Reduce MATERIAL cost directly due to inventory remaining:

Debt TK 152 / Have TK 621 or Have TK 621 / Debt TK 152 purchase real situations

4.2. Cost accounting employee works

Costs in building not only is the money wage base it also includes allowances, social insurance, health insurance and other allowances related to performance of construction.

• Collecting timesheet data from the market.
• Calculated, recorded costs in the process.
• Allocate costs correctly for each item of work, avoid general recording all on general expenses.

Record the exact costs and help businesses assess the effective use of labor between the works, cost control, human resources strictly according to the budget, providing actual data to estimate building plan manpower fit for the future project.

Accounting costs:

• Record costs incurred:
  Debt TK 622 – Cost, direct labour
  Have TK 334 – pay workers
• Deduct SOCIAL insurance, health INSURANCE:
  Debt TK 622
  Have TK 338 – internal payable (liabilities related BH)
• Payment:

Debt TK 334 – pay EMPLOYEES
Have TK 111/112 – Cash/Bank

Note: If you do according to securities contracts, contract services, accounting may be different but the principle is still the set costs in public works/categories

4.3. Cost accounting construction machines

Construction machines – including excavator, mixer, crane – is, fixed assets, but the cost of re-used often. Accountants must:

• Recorded depreciation on the machine construction, i.e. allocation gradually cost invested into the project cost according to duration of use.
• Track fuel costs, repair and maintenance cost.
• Allocation of the cost of construction machine according to the duration of practical use or by the volume of work, depending on the characteristics of each type of machine.

Allocation of the cost of construction machines right help businesses determine the exact cost of the project, avoid deviation costs, and as a basis for maintenance planning, estimating maintenance costs. Decision support investment in new machines or outsourced on the basis of cost-effectiveness.

Accounting recorded the cost of construction machines:

• When the recorded cost of using the machine:
  Debt TK 623 – Cost of used construction machine
  Have TK 111/112/331 (each voucher)
• Depreciation machine:
  Debt TK 623 – Cost of used construction machine
  Have TK 214 – Depreciation of fixed assets (depreciation months)

The cost of construction machines are allocated directly or by the final match on costs works to determine the price of the exact

4.4. Cost accounting general public school

General expenses the market, including the account:

• Cost management.
• Cost tents, electricity, water, and labor safety.
• The costs incurred associated with common activities of the school, not just for a specific item.

Construction accounting to set and allocate common costs in a reasonable manner for each work based on matching criteria, such number of workers, construction time, or total direct costs.

When common costs are allocated properly, statements price of each work more accurately reflect reality, and help businesses compare the results using the common expenses between the works, learn from experience in planning, personnel, equipment, and improve the quality of cost forecast for the next project.

Accounting general costs:

• Recorded general expenses incurred:
  Debt TK 627 – production Costs, general
  Have TK 111/112/331
• The allocation of common expenses for each work according to the criteria match:
  Debt TK 621/622/623 (Cost of works)
  Have TK 627 – production Costs, general

The allocation of general expenses right help report price closely reflects the actual cost of each work, easily compare, control, and lesson operate.

4.5. Design advance payment – settlement construction

In the construction process, the account of advance is normal, such advance for subcontractors or advance materials for construction teams. Accountants must:

• Follow closely the account of advance this.
• Adjust, reconcile and resolve timely payment when there is evidence from complete.
• Guaranteed not to outstanding debts and lasting influence cash flow.

Closely monitor professional advance to help businesses limit the loss due to the advance does not control, ensure steady cash flow if the account of advance lasts, at the same time support the process of settlement construction, deduction, expense and revenue recognition, the right time.

Accounting advance:

• As levels advance for subcontractors or workers:
  Debt TK 141 – advance
  Have TK 111/112 – Cash/Bank

Settlement advance:

• When completed vouchers, collated and settlement:
  Debt TK 621/622/623/627 – Cost construction respectively
  Have TK 141 – advance

Track on tight business advance help limit the backlog debts and ensure steady cash flow and recorded costs in the correct accounting period

5. Accounting construction of phased works

How accounting construction not only recorded the data end of the period which must follow the line cost, revenue throughout the construction process. Accounting phased help businesses assess the financial performance of each work piece, through which cash flow management, profit determination and estimation more accurate for the next project.

5.1. Accounting production cost construction

Accounting cost of production build is the first step, the most important to the business can control the project cost. For the construction business, this cost typically includes:

• Raw materials directly used for construction
• Workers directly involved in construction
• Construction machine, general expenses public school

Set the cost of this phased construction (example: foundation, steel frame, finishing) are very important.

How accounting under construction stage to help businesses:

• Track schedule actual costs incurred compared with the plan or the initial payment
• Early detection of differential cost to make timely adjustments in financial planning
• Support original command works, as well as the accounting coordination in assessing the productivity of labor, use of supplies and equipment

If only aggregate cost of the end states that are not divided according to stage, businesses will lack the data reflect the level of development project can be surprised by the cost exceeds the estimate, affect the cash flow and the ability to recover capital.

Practical example: A construction plan to use A material in the stage of nail is 500 million, but actual figures accounting collected showed that the actual cost is 600 million. If not, follow step by step, businesses can only know the total cost after the completion of the entire work, make the adjustment cost in the later stages become difficult or take opportunities to reduce costs.

5.2. Accounting price of construction

After the cost is fully synthesized according to the stage, the next step is to determine the price of works.

The cost of the project is the total cost actually incurred to complete the work was acceptance or the entire project. This is the basis to:

• Evaluating the results of business operations of each work
• Comparison between the actual cost estimate
• Base settlement with the investor or partner

Accounting equation must adhere to the principle:

• The full set of direct costs, allocation of indirect costs in a reasonable manner
• Do not leave any costs incurred
• Classification of costs according to each of the elements to compare with the plan

Determine the price of the right to help businesses assess the effectiveness each work, timely identification risk and expense. Data rates of reality at the same time improve the quality of the estimates for the following projects, increase competitiveness when bidding. In addition, this work also supports the tax settlement, financial inspection, transparent and strictly regulated.

5.3. Accounting revenue & experiences collected works

Revenue of works are often noted in one of two ways:

• According to the progress of acceptance: Recorded revenue corresponding to the portion of work has been investor acceptance satisfactory. This method is suitable when the project is construction of the phase pronounced and each stage is a partial payment under the contract.
• When the work is completed: revenue is recorded only when the whole construction tested and complete. This method is generally applied if the contract specified payment when the acceptance of the whole.

Businesses need to note when recorded revenue:

• Must be consistent with standards current accounting and tax rules, avoiding recognize revenue earlier than the actual test. Recorded at the wrong time can lead to false reports business results as well as legal risks affecting corporate income tax.
• Revenue recognition must match the cost was accounted for to avoid margin status is “inflated” due to recognition of revenue too soon.

Revenue management right process to help financial transparency, proactive cash flow and ensure revenue recognition, the proper accounting standards and tax, through which reduce the financial risk for the business.

6 Business need to do to accounting organization build effective?

Many business construction is difficult due to the accounting system has not yet been held, they sync. When the work increases, the cost of dispersion as well as construction time lasting, this easy to cause false data, slow reporting and difficult to control effectively each project.

6.1. Standardized accounting procedures construction

First business need to do is standardize accounting process, from the field to the office.

Specific business needs:

• Build process of accounting for all works, apply a general principle set cost as well as revenue recognition.
• Clearly define responsibilities between public accounting schools, accountant general and technical department, to avoid overlapping or missing information.
• Standardized form documents relating to the cost of materials, labor, construction machines and test.

When the process is standardized, professional construction accounting is no longer dependent on personal experience, thereby helping businesses reduce the risk of errors in accounting, cost control at each stage more efficiently, as well as advantages in the settlement, inspection tax.

6.2. Technology applications in accounting construction company

In many businesses, accountants are still dependent on Excel discrete, each works a file, each department a different track. This approach may be suitable when small-scale, but will quickly reveal limitations when business development:

• Data is not synchronized between accounting – engineering – project management
• Easy to errors when data aggregation
• Difficult to track costs, price real-time

Use accounting software – administrator works to help businesses solve thoroughly the above problems by:

• Data connection cost, schedule, acceptance and revenue on the same system
• Supported by accounting construction company in each work item phase.
• Significant reduction action, thereby improving the accuracy of the data

From the perspective of management, the core value of technology lies in its ability to provide timely data for decision-making. When the leader board tracking is cost-effective, each works according to real-time financial risk can be identified early to handle active.

7. Accnet ERP custom depth for the business field of construction

AccNet ERP is accounting software – business management is designed in accordance with the peculiarities, financial management, accounting construction in Vietnam. System requirements monitor long-term project, the cost of dispersal, test according to the stage, at the same time to support compliance with the prescribed accounting – tax-current. Specific AccNet ERP allows:

• Manage cost, price, revenue details in each work item, the construction phase, to help businesses understand the financial performance of each part.
• Support accounting construction of a consistent way, including the cost of materials, labor, construction machine, general expenses the market, thereby limiting errors due to manual processing.
• Connect, sync data between your accounting, engineering department, project management, leadership on the same platform, ensure data throughout, in a timely manner.
• Provide reporting system administration, flexible service tracking progress, costs, comparing actual with estimation, decision support operating..

Difference of AccNet ERP lies in the ability to customize according to the model the actual operation of the construction business, instead of applying a rigid template. Thanks to that, the business not only to use the software to record the data, transforms the data, accounting tools, financial management as well as effective control of the project.

ACCOUNTING SOLUTIONS ACCNET ERP INTEGRATED AI AUTOMATE ALL BUSINESS

AccNet ERP is a software solution financial accounting integrated in the management system, comprehensive enterprise, which is developed by Lac Viet corporation. Difference highlights of AccNet ERP is the app artificial intelligence (AI) in many accounting process to help businesses:

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• Khatoco – expansion pack solution AccNetC after the successful implementation of original: Lac Viet has successfully deployed package solution AccNetC for trade co., LTD Khatoco in Nha Trang, according to the agreement signed on 29/07/2014. After the system is first put into operation efficiency, Khatoco intends to continue cooperation and expand the distribution finance – accounting and retail management with AccNetC, expressing the deep trust in implementation capacity and quality of service from Lac Viet.

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Construction accounting plays a critical role in cost control, cash flow management and assess the effectiveness each work. The organization of the accounting right peculiarities industry, accounting according to the stage as well as keep abreast of progress helps enterprises limited financial risk, enhance transparency, active in operating. When accounting data reflect the fact, leaders base decisions accurate, optimal resources to enhance efficiency and sustainable business.