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For example, instead of a fixed 10% holdback on each progress billing, you might negotiate terms that reduce that rate to 5% once the job reaches the halfway point. If you\u2019re an emerging contractor still wrestling with the unique challenges of construction accounting, this guide will make sure you\u2019re equipped with the tools to make sound financial decisions. Consider this resource a jumping-off point \u2014 we\u2019ll outline the basics and point you toward more in-depth guides on each topic covered so you can keep your construction company moving forward.<\/p>\n<\/p>\n
For contractors, having robust bookkeeping practices helps maintain profitability and control over each project. Working capital turnover measures how much revenue each dollar of working capital is producing. To calculate working capital turnover, first calculate working capital, which equals current assets minus current liabilities. General contractors need to subtract subcontractor payments from revenues to calculate working capital turnover, as this money simply passes through the GC from the owner. Accounting ratios are calculations that a construction business can use to get an overview of its financial health. There are dozens of accounting ratios that look into various aspects of a company\u2019s finances.<\/p>\n<\/p>\n