Accounting for Construction Business | How?


In order to be successful in the construction industry, you must have a solid understanding of accounting. 

However, handling your business’s finances effectively isn’t always easy, especially if you’re not a big fan of numbers. 

Aside from that, business owners in the construction industry face unique challenges.


How Is Construction Business Accounting Different?

A construction company’s accounting is more complicated than most companies because the work is more complex, the pricing is different for each project, the operating costs fluctuate, and so on. As part of their accounting duties, construction companies must be able to keep track of and report expenses, bid on projects, pay employees and manage payroll, among other things.

Following are the key ways in which construction accounting differs from other types of accounting.


Usually, contractors work on multiple projects at the same time. Even after a project is completed, it may not be paid for in full, or it may take months for the final invoice to be paid.

As a result, construction businesses may be required to provide separate profit and loss (P&L) accounts for each project.


In contrast to regular businesses, which typically sell 1 to 5 different products or services, construction companies provide a wide range of services. Among them are service work, design services and consulting, the sourcing of materials, and many others.

As a result, it can be difficult to keep track of expenses and accurately calculate the profit generated from each service.

Fluctuating Overhead Costs

It’s not uncommon for construction companies to have fluctuating overhead costs as well. Remember to factor in the cost of the following: insurance, transportation, workers’ compensation, materials, sub-contractors, and more. Your construction accounting will need to take this into account.

Cost of Goods Sold

Most businesses record the cost of the products sold, but construction businesses are quite different. Each job incurs direct and indirect costs that may fall into a wide range of categories. It’s essential that contractors have an effective method for keeping track of income and expenses and for reconciling every transaction. 

Long-term Contracts

Your company may manage short- and long-term contracts, often with varying end dates. This means you may not get paid at the same time every month. You will need a flexible yet organized accounting system to stay on top of cash flow and keep your books in check.

How to do Construction Accounting?

1. Put Your Best Bookkeeping Foot First

We understand you’re busy managing apprentices and dealing with emergency call-outs, but having your books in order is essential. Accounting and bookkeeping are two things you really can’t ignore.

Not only does bookkeeping help manage expenses, but it allows you to make better business decisions down the line. It includes jobs like recording financial transactions and completing payroll.

2. Track Important Expenses

Tracking business expenses can be a bit tricky. It’s not just tracking materials – it’s labour too. If you don’t have separate accounts or cards for personal spending, important expenditures like this can get mixed in and be difficult to find when it’s time to file returns.

An easy fix for this is opening up a separate account solely for business if you haven’t already. This will help distinguish building materials from your weekly supermarket shop.

3. Take Care of Daily Records

The critical thing to know about construction accounting is that you have to do it regularly. Maintaining daily records is one of the easiest but most important steps. It’s a lot more difficult for you to track the financial position of your business if you don’t keep accurate records.

Aim to implement a system and stick to it. Even if you’re away from the desk and working on a job, there are easy-to-use apps that do bookkeeping on the go simple.

Keep accurate records every day, and there won’t be any mistakes when completing your tax returns.

4. Be Aware of Tax Deadlines

A tax deadline can be tedious for anyone. It’s best practice to set a reminder, so you have enough time to complete your tax returns without any mistakes.

Keeping records accurate can ensure returns are sent off by the deadline. HMRC won’t be chasing you up because of any errors, so you’ll avoid unwanted penalties.

5. Manage Your Cash Flow

Construction accounting requires some caution. Big expenses for complex jobs should also result in big revenues. Make sure to invoice clients regularly or ask for payment upfront for expensive materials and labour.

If a client decides not to pay for any reason, you should stop work immediately to avoid damaging your cash flow. The majority of small construction companies fail because they’ve neglected this step. However, if you maintain your cash flow carefully, you won’t be one of them.

In the End

Construction accounting doesn’t have to be a headache. With the proper process, you can save time on your invoicing, accounting, bookkeeping, and tax preparation, even without previous accounting experience. 

Improving your process starts with understanding how construction accounting is unique and determining the different types of job costs you can incur on each project.

The best way to stay organized is to track your day-to-day transactions, reconcile your accounts on a regular basis, and use smart accounting software.

With the steps in this guide, you have everything you need to do accounting for your construction company the right way. 

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