Track and Know your Costs with a Chart of Accounts: Statistics surrounding the success of a construction based contracting are scary. “74 percent of businesses fail by the end of the third year.” Michael C. Stone, Markup & Profit (Follow Him on LinkedIn). However these numbers do not need to define our success.
A key metric to becoming a successful contractor is knowing and understanding your costs. One of your major weapons in your arsenal of profitability is a Chart of Accounts. Simply put this numbered list defines how you will both track and categorize accounting information. Without applying this (or a similar method) business owners don’t know how much money is spent. You also don’t know what it has been spent on and what to target to be profitable.
For the construction industry there are several basic account types. They are: Assets, Liabilities, Capitol, Income or Revenue, Job Related Costs, Overhead Expenses, Other Income and Other Expenses. We have included a sample Chart of Accounts designed specifically for the construction industry for you to download and use. Content from Karen Mitchell, Contractor’s Guide to QuickBooks Pro (Karen’s page on Amazon) was used in creating this Chart of Accounts. It’s imperative to track and know your costs with a chart of accounts. Doing this will prevent your business from unknowingly hemorrhaging money.