Construction companies cannot make it far without tight accounting practices for projects, enterprise resource planning and other core financial processes. When these activities are not managed properly, risks related to budget, project completion timeliness and contract awards will be inherently higher. Technology has progressed significantly in recent years, with solutions specialized for the demands of modern construction accounting helping adopters to navigate.

However, construction leaders also need to keep up with the changes taking place in compliance and regulation, potentially using newer versions of software to improve their responsiveness to such overhauls. One such change was just finalized and explained to various industries from the Financial Accounting Standards Board that will indeed impact construction companies within the next couple of years.

At a glance
Construction Equipment Guide recently reported that one of the major changes that construction firms need to be aware of is the change in leasing terms, specifically with respect to accounting for such credit lines. According to the news provider, operating leases will need to be accounted for as “non-debt liability” once the rule comes into effect, and this will be a notable change given the traditional methods of tracking these matters.

The source stated that the change will actually bring the accounting practices of construction firms closer to the analysis processes of lenders that would be providing the operating leases. This bodes well, as it could end up putting organizations into a better position to be approved, or at least offering a better initial perspective on the chances of acquiring the lease. Construction Equipment Guide added that the rules will not come into effect until 2020 for private industry players, but that it might be wise to begin planning.

For example, the news provider suggested taking a closer look at how the IT department and software assets will need to be managed in light of the changes.

Never too soon to improve
The Commercial Observer recently argued that the entirety of changes released by the FASB this year will shift roughly $4 trillion of liabilities to tenants given the adjustment to balance sheet rules and best practices involved. Construction firms that compete in real estate markets should be especially quick to study the changes and deploy processes to adapt before the deadlines hit.

With the right construction accounting software in place today, navigating these types of changes will be a bit more straightforward for all.