The strategy of Accounting Business of Construction Enterprises

When a project starts or a new enterprise is established, both face the problem of establishing a new account. It is not difficult to establish one, usually, you should first think about appointing construction industry accountants. When making vouchers, you should think about how to set detailed subject levels for each subject. Is it better to use auxiliary accounting, or to set up detailed subjects directly under the accounting subjects?

Under normal circumstances, if there are more units, more departments and stable, or more projects, the auxiliary accounting method should be adopted (it can be used separately according to the actual situation of each accounting subject, and it is not necessary to have both). Otherwise, you could directly set up detailed subjects under the accounting subjects to simplify the workload or opt for outsourced accounting services. This could ease your burden and reduce the workload of your employees. Under normal circumstances, it is more appropriate to use auxiliary accounting for the accounts of the company’s headquarters (involving many units, projects, and departments are also more and stable), and it is better to set detailed accounts directly under the accounting subjects for a single project account. You can discuss these methods with an accountant like to see which ones would ultimately be better for the business and the finances.

According to the differences in the management of each company, the financial accounting, and management of construction enterprises are divided into headquarters centralized management (centralized type, where the company directly prepares financial statements) and separate project management system (decentralized type, summarized statements by the company headquarters). The enterprise company that adopts the centralized management of this department has only one set of accounts, all project accounts are handled in the same set of accounts of the company, and each project is only responsible for preparing project cost reports and analysing project costs. Decentralized management is the establishment of separate sets of accounts for each project of the company. Each independent project has a separate bank account and separate related accounting processing, preparation of financial accounting statements. Finally, the company headquarters summarizes the financial statements of each item.

The advantage of centralized authority is that the company headquarters can keep track of the cost of the company’s various projects at any time, and implement real-time monitoring and dynamic management of the cost of each project, which is conducive to the company’s strengthening of financial management. It is suitable for companies with many projects in the company headquarters and nearby. The disadvantage is that the accounting data for foreign projects may not be timely and cannot accurately reflect the company’s financial status; it is not conducive to the tax planning of construction enterprises.

The advantage of decentralization is that it reduces the accounting work of the company’s headquarters, helps each project department to reflect its financial status in a timely and accurate manner, and is beneficial to the company’s tax planning. The disadvantage is that it is easy to cause excessive power of the project manager and breed corruption. If the project’s financial staff cannot play a good supervisory role and are strong in management, it is not conducive to the company’s financial management. The implementation of decentralization requires the company to implement the appointment system for project financial personnel. Financial personnel are evaluated by the company, but they must have considerable power and maintain good professional ethics. It is suitable for construction enterprises with many projects in other places.

No matter which method is adopted, we must focus on strengthening the financial management of the company and the project, and give full play to the accounting, supervision, and reporting functions of the financial department. Moreover, the operation of the financial department can be better streamlined if the processes are automated using ERP software or similar others. ERP software can be used to forecast and record data, construct financial planning models from the actuals, and train employees to explain variances. However, it might be necessary to consult experts in the field in case a company makes a shift to ERP software as advanced business process and technology assessment up-front is a crucial component of any successful ERP project, and because the implementation of the system should also be carried out properly.

Thank you for reading!

How do you find the article?

View Results

Loading ... Loading ...