Accounting of a construction company in Bulgaria

In accounting house “Elan Consulting”We understand the uniqueness and complexity of accounting of a construction company. Construction is a dynamic and multi-phase business that requires a detailed and accurate approach to accounting of expenses, revenueand Cost of construction production. Our goal is to offer complex accounting services, adapted to the needs of your construction company, whether it is located in Burgas, Sofia or another part of Bulgaria.

Accounting of a small company, including construction, implies an understanding of the specifics of the industry. From accounting of construction of a buildingto revenue management for future periodsand Accounting for material and resource accounts (SMR), our team is here to provide support and expertise. We are aware of accounting standard for constructionand industry best practices that ensure your company operates in accordance with legal frameworks and industry requirements.

The cost of accountingis an important factor for any business. “Elan Consulting”offers competitive pricing for accounting services that are transparent and tailored to the needs and scale of your business. We believe that the right accounting of construction costsand the optimization of Cost of construction productioncan significantly affect the profitability of your project.

Every successful construction project begins with accurate and responsible accounting. Our experts are here to give you peace and confidence that your financial operations are in safe hands. Trust “Elan Consulting”for all your accounting needs and be sure of the successful development of your construction company.

Why trust Elan Consulting for the accounting of a construction company?

The choice of an accounting house for any construction company is a key decision that affects the successful management of finances and compliance with regulatory requirements. Elan Consulting offers specialized service, which is especially important in the construction industry, where accounting and tax requirements are complex and dynamic. Accounting in the construction sector requires in-depth knowledge of specific standards such as IAS 11 and SS 11, which regulate the accounting of construction contracts. Elan Consulting has the necessary expertise and experience in the field, ensuring accuracy and compliance with current accounting and tax regulations.

In addition to its technical training, the Elan Consulting team understands the specifics of the construction industry — from project cycle and budget management to the administration of complex contract structures. This specialized preparation is essential to optimize the tax and financial performance of construction companies. A key element in the services provided by Elan Consulting is the individual approach. Each construction company has its own unique characteristics and requirements. The Elan Consulting team is committed to understanding the specific needs of each client, offering customized solutions that meet the specific requirements of the construction business.

Elan Consulting also offers a proactive attitude to changes in legislation and market trends. The construction sector is often faced with dynamic regulatory changes. The accounting firm ensures timely information and adaptation to these changes, which is critical to maintaining regulatory compliance and avoiding financial risks.

In addition, Elan Consulting provides comprehensive consulting covering all aspects of accounting and taxation. This service is essential for construction companies that need advice on optimizing tax policy, managing capital flows, financial planning and analysis. Elan Consulting clients can count on constant support and advice that contributes to better financial management and strategic planning. The company's approach to customers is characterized by responsiveness, professionalism and striving to build long-term, trusting relationships.

Finally, we at Elan Consulting understand the importance of technology in modern accounting and implement the latest software solutions and digital tools, which allows efficient management of accounting processes, increased transparency and accessibility of financial information for clients. For construction companies looking for a reliable and competent accounting partner, Elan Consulting offers confidence and security in the financial and tax aspect of their business. Adding to this the personal approach and flexibility, Elan Consulting becomes a valuable resource for any construction contractor who wants to develop their business on a sound and stable basis.

Features of accounting of a construction company

In the accounting of construction companies, we are faced with a number of specifics arising from the nature of their activities. These include unique methods of accounting for long-term construction projects, high-risk management, and complex budgeting. At Elan Consulting Accounting Firm, we provide services that cover all aspects of these specifics, ensuring accurate and transparent reporting of financial transactions.

‍The construction sector is characterized by unique accounting requirements related to the specific nature of construction projects. These projects are often long-term and involve multiple stages, which necessitates a special approach to accounting for income and expenses. At Elan Consulting Accounting House, we understand that it is essential to report the progress of each project in a way that accurately reflects the current financial situation. This involves the use of methods such as accounting of commitments and methods of income recognition, which are adapted to the specifics of the construction industry.

‍One of the key aspects of accounting for construction companies is cost and risk management. Construction projects often involve significant material, labor, and operating costs that need to be carefully monitored and controlled. At Elan Consulting we strive to ensure that our clients have a clear and accurate picture of their finances, allowing them to make informed decisions about cost management and minimize risks. This includes detailed cost analysis, budget planning and forecasting to ensure each project is financially sustainable and feasible.

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What are the types of construction contracts and why are they important for the accounting of a construction company?

The construction sector is extremely diverse and dynamic, encompassing a range of projects, from buildings and infrastructure sites to specialised facilities. Any construction project begins with the signing of a contract that defines the conditions, volume of work, cost and duration of construction. Understanding and properly managing these contracts is key to the success of construction companies and their effective accounting. Construction contracts establish the fundamental rules, conditions and financial arrangements between the construction company and the client. Proper management and understanding of different types of contracts not only optimizes project execution, but also provides a solid basis for accurate accounting.

Proper accounting of construction contracts is essential for the financial health of any construction company. It requires detailed knowledge of the different types of contracts, as defined in the International and National Accounting Standards. Understanding the specifics of each type of contract helps construction companies recognize income and expenses in an adequate and lawful manner.

In this sense, the use of various contracts in construction is not only a matter of legal and managerial preferences, but also a key element in the accounting process. It depends on this how the company will report its income, how it will manage its financial resources and how it will deal with the financial risks associated with the various construction projects.

What are the main types of construction contracts?

General definition of the concept construction contract‍

• The construction contract covers the construction of a variety of assets such as buildings, roads, bridges and other complex structures.
• From an accounting point of view, it requires detailed accounting of all expenses and income related to construction activities.
• It requires a specific and detailed approach to project management and financial control.

Contract on a “Hard Price” Basis

• In this type of contract, the contractor agrees on a fixed price for the entire project.
• This approach reduces the risk to the client, but increases the potential risk to the contractor in case of unexpected cost increases.
• It is extremely important to consider all potential costs and plan carefully.

Contract Based on “Cost Plus”

• This type of contract allows the contractor to receive reimbursement of eligible costs plus additional remuneration.
• It is suitable for projects where it is difficult to determine the volume of work or the final cost in advance.
• It requires transparency and constant reporting of all costs incurred.

Method of “Share of Completed Construction”‍

• This method allows the recognition of income and expenses depending on the degree of completion of the project.
• Extremely suitable for long-term projects where work progresses over time.
• It improves the accuracy of financial reporting and helps to better manage resources.

Why are construction contracts important from an accounting point of view?

Construction contracts represent one of the most complex aspects in accounting practice, especially because of the dynamic nature of the construction industry. These contracts often cover multiple components - from materials and labor to time frames and potential risks. Their correct reflection in the accounting books is essential for the accurate financial performance of construction companies. The basis of the accounting of construction contracts is the reliable assessment of income and expenses. This requires accurate planning and forecasting, which is fundamental to successful construction project management. A reliable assessment not only helps determine the financial success of the project, but also provides a basis for making strategic decisions on the part of management.

Fixed-price contracts offer financial stability and predictability by setting clear frameworks for project revenues and expenses. However, they also carry a high risk for construction companies, especially if they face unexpected cost increases. Accounting for such contracts requires careful analysis and control of financial flows. Cost-plus contracts, in turn, give construction firms more flexibility by allowing them to obtain reimbursement of eligible costs. However, this requires strict accounting and constant monitoring of all costs to ensure that they are within the agreed parameters. The method of share of completed construction, on the other hand, offers a realistic way to account for income and expenses during the construction process. This method is particularly suitable for long-term construction projects, where costs and progress can vary significantly during the different stages of construction.

In conclusion, construction contracts are essential for accounting in the construction industry. They form the basis on which the financial structure of any construction project is built, providing the necessary framework for proper financial management and reporting. Overall, in construction contracts, the most crucial point is to assess the likelihood that the firm will receive the economic benefits of the contract. This includes a careful assessment of potential income and expenses, as well as adequate risk management. One of the biggest challenges in construction is risk management, especially in fixed-price contracts. Unforeseen expenses can lead to significant financial losses. Therefore, effective risk management and continuous monitoring of the project are critical to protect the financial health of the company.

What taxes do construction companies owe?

‍Construction companies in Bulgaria face a number of tax obligations that are key to their successful financial management. The tax framework within which they operate covers different types of taxes that can have a significant impact on their financial activities. At Elan Consulting we are focused on providing accurate and up-to-date information on tax obligations and tax optimization strategies to our clients in the construction sector.

‍One of the main taxes that construction companies have to pay is corporate tax. This tax is calculated on the company's profits and requires careful accounting of all income and expenses. It is important to understand how specific construction activities affect taxation, especially when it comes to long-term projects and the recognition of income and expenses. In addition, construction companies must be careful in accounting for depreciation costs and other taxable expenses.

‍Value Added Tax (VAT) is another significant tax that affects construction companies. It is applied in the sale of goods and services, including construction services. It is important for construction companies to understand how to calculate and declare VAT, as well as to know the conditions for the right to deduct VAT. This aspect of accounting can be particularly complex in cross-border projects or when subcontractors from different jurisdictions are used. At Elan Consulting we provide specialized VAT management services that help our clients reduce tax risks and optimize their tax credit.