Accounting for construction companies comes with unique challenges, especially regarding revenue reporting and VAT compliance. One major issue is determining how much to report as revenue at the end of the financial year when some contracts are still ongoing. Another challenge is calculating VAT amounts payable during each VAT cycle, considering the contract value and actual cash received. Properly addressing these concerns is crucial for effective bookkeeping in the construction industry. Failure to account accurately can lead to serious consequences, including non-compliance with PAYE and VAT regulations. In some cases, this has resulted in business owners and accountants facing legal action or even liquidation applications from SARS. Additionally, non-compliance with tax clearance and CIPC annual return requirements can prevent companies from tendering for new projects, impacting their growth and stability. For property developers, general contractors, engineering firms, and renovation or demolition companies, maintaining high accounting standards is essential. Good bookkeeping helps manage risks, ensures compliance with SARS regulations, and provides financial stability. In this guide, we’ll outline the requirements for effective construction bookkeeping, its benefits, and how we can support your business in meeting these standards. Let’s get started!

The Requirements for good and effective Booking for Construction Companies in South Africa

To effectively manage accounting services for your construction company, bookkeepers rely on maintaining a comprehensive record-keeping system. This involves accounting for all tax invoices, supplier invoices, and professional estimates that require careful judgment from your management team. The key is implementing a strong internal control system to track and control all financial information, including these crucial documents. Failing to maintain such a system can result in incomplete accounts, leading to increased business risks. For example, not properly accounting for supplier invoices could lead to overpaying taxes, or failing to account for all tax invoices might result in underpayment, only for SARS to impose additional penalties later. Construction businesses can reduce their business risks by ensuring proper documentation and a robust internal control system.

What are the Highest Standards of Accounting for Construction Firms?

In South Africa, accounting reporting standards align with global practices, ensuring consistent and comparable financial reporting worldwide. Bookkeepers must adhere to the highest standards when compiling accounting reports for construction companies to maintain these standards.These standards are called the International Financial Reporting Standards (IFRS) promulgated by the International Accounting Standards Board. The applicable standard for reporting in the construction industry is IFRS 15, effective from January 1, 2018. This standard applies to construction companies earning revenue from contracts with customers, whether through direct contracts or subcontracts. Under IFRS 15, revenue recognition occurs when a performance obligation is satisfied by transferring a promised good or service to the customer — essentially when the customer obtains control of that good or service. Performance obligations may be fulfilled at a single point in time (e.g., transferring goods) or over time (e.g., transferring services). For obligations satisfied over time, an entity must select an appropriate measure of progress to determine how much revenue to recognize as the performance obligation is fulfilled. 

Who Provides Bookkeeping for Construction Companies in South Africa? 

Several professionals in South Africa are trained to perform bookkeeping for construction companies. The training usually involves exams, ethics, and three years of professional experience. They are either members of SAICA, ACCA, or the Institute of Chartered Secretaries. A number of these professionals hold designations, including Chartered Accountants, Associate General Accountants, and Accounting Technicians. SAICA, the Chartered Certified Accountant who are members of ACCA and Chartered Secretaries who are members of the Institute of Chartered Secretaries.