There are many ways to track contractor expenses on a construction site. Whether you manage a construction project, run a contracting or subcontracting company, or subcontract, how you spend your budget and manage cash flow impacts your business. A budget that runs out can bring a project to a screeching halt, and mismanagement of expenses can negatively impact your reputation.
Here’s how to track contractor expenses:
Know your limits
You must have an accurate budget in front of you and understand the limits regarding contractor expenses. Avoid overly optimistic estimates and lack of due diligence.
Cost control representative
Appoint someone to oversee contractor cost tracking. Make sure this person is reliable and experienced. They must demonstrate a comprehensive understanding of all project costs, be able to prepare important documents, analyze cited documents and other relevant data, and have the background and data necessary to make key decisions on behalf of the project.
Monitor all costs
As you track the financial stability of the project, monitor all costs in your contractor accounting software. Be able to determine where every dollar in your budget is allocated. Classify expenses and ensure they are clearly mentioned in financial reports.
Bank account structure
Make sure your bank accounts are ready to receive and send money. Any problem or disorganization at the bank level will only cause a headache when tracking contractor expenses and meeting expectations regarding payroll and cash flow.
Digitize every document
is used Contractor accounting software To track contractor expenses and digitize every document, from receipts and purchase orders to invoices and records. This helps in several ways, simplifying tracking contractor expenses and keeping you audit-ready.
Evaluation of different programs
There are many different major players in the construction accounting software game, so evaluate several pieces of software before deciding which one you want to keep. Make sure the software you choose has the features you need.
Group expenses by category
Expenses should be divided into categories and subcategories, such as labor, materials, equipment, and facilities. This helps keep analyzes and reports clear for stakeholders reviewing contractor expenses.
Track costs in real time
Don’t wait for a financial report to highlight how money is spent with contractors. Track costs in real time and check them regularly. Evaluate patterns and objectively analyze project financial status based on contractor expenditures.
Manage subcontractors carefully
Maintain records of all subcontractor costs, record payments, and track subcontractor expenses. Ensure subcontractors perform and are paid according to project requirements and approved costs.
Standardize the expense tracking process
Create a unified system for tracking expenses. Advanced contractor accounting software makes it easy to set up automated recording and tracking of purchases, payroll, and operational costs.
Make sure your contractor team is properly trained
Every team member should be trained to follow your contractor’s expense tracking system. Make sure each contractor understands precisely how to upload receipts and record expenses. Follow up with any stakeholders who do not adhere to set standards.
Employ mobile applications to track expenses
With mobile apps integrated with your accounting software, make it as easy as possible to record expenses right from the field. This way, there is no delay in accessing real-time data, and these updates consistently arrive on time.
Automate contractor time tracking
Monitor contractor hours spent on specific phases and tasks. Based on these records and timelines provided, you can automate payroll. Use this expense data to inform future project phases and incoming contractor expenses.
Invoice automation
Automate invoices based on recorded expenses with your contractor accounting software. Track payment statuses in real time. Always ensure that subcontractors and suppliers are paid promptly to avoid disruptions or strain on the relationship.
Eliminate unprofitable tasks
Tracking task-specific expenses may reveal areas where contractor expenses are unnecessarily high. Identify these unprofitable areas and consider cutting expenses that exceed estimates or are too high.
Monitoring all project expenses
Any delay or interference in the contractor’s work could lead to increased contractor expenses. For this reason, carefully monitor material costs, inventory quantities, delivery dates, equipment rental or purchase, equipment maintenance, and more.
Track tax deductible expenses
Maintain detailed records of all expenses related to tax benefits, such as travel, fuel, and meals. Record everything and support it with receipts. This will make preparing for tax time more efficient and reduce stress for everyone involved.
Review all financial reports
As you write and issue financial reports, review each one regularly. Examine cash flow and profit margins, identify cost saving opportunities where they exist, and optimize spending by eliminating inefficiencies.