Tasmania, No Longer the Forgotten State
Why Hiring an Apprentice is Smart Business
Industry Leaders Drive Sustainability Efforts
Making Concrete Smarter
Capricorn Highway Duplication Project Set to Go Underway
Foreign Investors Set Their Sights On Australian Builders
Creating a Social Media Program That Works
Largest Solar Farm in the World to Open In Queensland
By Duane Craig
February 12, 2018
More and then 5,300 years ago people began to account for goods in ancient warehouses. What began as simple marks scribed in clay or parchment, evolved into detailed records by the time of the Egyptians. Much later, in the 14th century, the model for modern accounting was born in Italy. Double entry bookkeeping not only ushered in an entirely new aspect of accounting, but also started spreading the use of Arabic numerals in business.
The history of early construction accounting has been largely obscured by construction’s place in commerce, the methods used to build things, and the fact that it was mostly funded by monarchies and religions. But, beginning around the time of the Renaissance, there is evidence of greater attention to the details of accounting on construction projects.
While details of construction at French Renaissance building sites were fragmentary, there were some very detailed accounts that survived from the late 15th century, and into the early 16th century. Construction on the castle of Gaillon, for example, between 1498 and 1509 involved at least five different bookkeepers, each with his own personal methods, abbreviations, and codes. Standardization was lacking in accounting at the time. Still, researchers have painstakingly sorted the details, and have come up with interesting findings about construction accounting in that era.
At the castle Gaillon there were “22 masons, 14 carpenters, 7 sculptors, 19 painters, 5 painters on glass, 8 joiners, 3 melters, 3 plumbers, 7 goldbeaters, 6 principal brick makers, 4 blacksmiths, 2 farriers, 6 slate roofers…for covering structures, 7 carters, approximately 30 suppliers of lime, 3 goldsmiths, 11 upholsterers and embroiderers, 3 Flemish weavers,” and more. To complicate things, many of the craftsmen worked in more than one craft. Also at the time, a master mason oversaw everything, so there were no contractors, subcontractors, architects, or engineers. The work week was six days, and everyone got paid on Saturday. There was also a large contingent of immigrant labor and workers of all types traveled from one construction site to others as needed.
The accounting records also show how different the mix of costs was in those days when compared to today. Labor expense between 1501 and 1503 at Gaillon was 74%, while materials cost 21%, and provisioning the materials cost 5%.
Construction accounting records became more abundant and complete by the 17th and 18th centuries. This happened partly because the nature of construction changed to one where contractors became more central to the building process. These contractors operated under conditions that would send most of today’s contractors looking for another profession. It wasn’t uncommon for contractors in England to wait up to 30 months for payment on completed works. The contracts contained the prices the owner would pay, and the owner could discount those prices if they weren’t happy about the results.
Since contractors often borrowed money to pay weekly wages, and they received payments for completed work often 18 months later, their margins were cut by at least 10% by the time they paid the interest on the borrowed money. Contractors didn’t have any protection for rising material prices, client discounts, late payments, or operating costs. Measurers did much of the jobsite accounting and were present at many aspects of the project where they spent their days recording the amount of lumber sawed, or how many stones were laid. Construction accounting no doubt looked a lot more complicated in the previous centuries, and it was hampered by manual processes done by multiple people on any given project.
By the early 20th Century there were audited financial statements, laws related to CPAs in the U.S., and an international Congress of Accountants had formed. When UNIVAC delivered the first commercial computer to the Census Bureau in 1951, accounting in the U.S. had already gone through massive changes as regulators tightened controls on business fraud during the previous three decades. But, for construction, the advantages of accounting with the help of computers was a long time away.
Pens, pencils, paper, and calculators dominated construction accounting as craftsmen and tradespeople started branching out on their own––seeking independence and wider opportunities as general contractors. An indispensable tool for construction accounting during the 50s and 60s was the manual spreadsheet, basically the ledgers used for bookkeeping. But then, along came VisiCalc in 1979. Developed by VisiCorp for the Apple II personal computer, the program turned personal computers into business machines.
Two years later, IBM released the first IBM PC setting the stage for the release two years after that of Lotus 1-2-3. With growing interest in computers by business, Microsoft saw the handwriting on the wall and released the program that would eventually take construction by storm—Microsoft Excel. First released for the Mac in 1985, it was ported to Windows two years later. Spreadsheets were accounting’s workhorses for at least two decades, but by 2015 only slightly more than 3% of construction firms reported using them for accounting.
Today, Sage, Viewpoint, and Quickbooks handle the accounting needs of more than 57% of surveyed construction firms. With growing use of mobile devices and cloud computing, construction accounting is entering a new era with live field data feeding real time reporting. From a historical perspective, construction accounting is evolving as it always has, to accommodate changing times. For many construction firms, adopting advanced accounting practices could very well mean the difference between making history, or becoming history.
The Anatomy of a Request for Information (RFI)
The AEC industry relies on drawings for everything, from the external site plan and interior layout to the punch list and RFIs. According to Home Improvement Pages, a custom-designed residential ho... Read More
Construction work as we well know is a team effort, requiring the synchronization of workers, equipment and materials. And just as construction wo... Read More
Listen in to this free webinar with Carey Larsen, Social Marketing Manager at Procore, Bob Gardner, CEO of Gardner Builders, and Jessica Stoe, Bran... Read More
At a rural Ohio job site, Wieland Construction and its subcontractors are managing progress entirely from mobile devices — an investment they say h... Read More
The majority of project leaders and teams on site today still utilize outdated, manual tools and processes—even though there are plenty of technolo... Read More
Keeping workers safe on road construction sites is an ongoing problem, underlined by the fact that the number of fatalities at these sites increase... Read More
Automation has improved by leaps and bounds over the last decade, and the technology is proving viable as more companies start to incorporate some ... Read More