Reporting on Profit and Loss for Construction and Building Companies is linked directly to the stage or percentage of completion of the project rather than being a simple cost of sale compared to value of sale calculation. This is as determined internationally under IFRS, IAS-11.
If the accounts were zeroed at the end of a financial reporting period, the business would not be able to relate the profit/loss to the completion stage of individual projects where(and which is usually the case) the projects are running over a number of financial years.
When looking at ‘percentage complete’ we need to consider the final estimated cost and revenue as compared to the estimated cost and revenue to date and not only in the reporting year in question. Again, CCS BuildSmart in conjunction with CCS Candy provides the reporting capabilities on a project level.
Calculating project cost considers elements that would not usually impact traditional assessment of net profit. Elements peculiar to the construction and building industry such as workshop cost, internal repairs and plant will affect the project cost to date and therefor the real profit and loss for a project. CCS BuildSmart caters for this by providing additional bespoke elements such as Plant Manager and Workshop Manager.
Management and separation of Internal Costs will allow them to be apportioned to individual projects thus removing them from the overhead expense accounts. In addition to the Cost Ledger, and the Plant Ledger, CCS BuildSmart also creates specific reporting and allocation of Overhead Expenses into the ‘Overheads Ledger’ to be applied at project level.
Managing the use and ‘life expectancy’ of equipment and plant machinery is another peculiarity CCS BuildSmart will assist you with. Factoring in depreciation as part of the cost to date will allow not only for the true cost of the construction but also manage the plant and equipment itself in terms of both effective utilisation and (where necessary), replacement. To facilitate the management of plant and equipment costing, CCS BuildSmart separates the Plant and Equipment into the ‘Plant Ledger’.
Both CCS Candy and CCS BuildSmart were developed and improved on a global stage and were built with a full working knowledge and understanding of Tax and how to apply tax bands, VAT, limits, exceptions to the integrate accounts, throughout the construction world. Where the tax environment changes, CCS’s Candy and BuildSmart are able to adapt as they have the full functionality to operate anywhere in the world and the user is only required to enter the type and rate of the tax applicable to the country of operation.
When considering whether the construction estimating and project management system you are using or thinking of using is suitable for handling VAT, make sure it is robust and adaptable to that as well as all other forms of taxation but, equally or more importantly, that it is developed and fit for purpose within the construction industry.