We are often asked how construction accounting is different to other types of business accounting.

At its heart, construction businesses have the same goals as any other company – to operate profitably with a healthy cash flow, in order to take on new projects and grow.

If you have a question about your business finances or would like to find out more about our specialist services for the construction sector, please get in touch with us now.

Because projects can take a long time to come to fruition, it is important to watch the numbers associated with the following:

  • Estimates
  • Contract amounts
  • Purchase orders
  • Quantity totals
  • Subcontracting costs
  • Billing schedules

Due to the lengthy timelines which are often involved in delivering a project, you’ll need to have figures by job on a yearly, quarterly, monthly or even weekly basis in order to keep a careful control of your cashflow.

You will need to keep a close eye on accumulators – which record the cumulative values of defined items as they’re processed – in order to ensure your project is coming in according to budget. If there are any variances, this will give you the opportunity to re-look at the figures and, if necessary renegotiate costs with the client rather than presenting a surprise bill on completion which is way over the original estimate.

As with project totals, period to date accumulator figures can be prepared on a yearly, quarterly, monthly, weekly or even daily basis, depending on the requirements of the particular project.

Most construction projects will hit a bump in the road at some point which will require plans to be revised. Taking early control of any amendments to the original design, building materials and other expenses, will help you to plan ahead and manage any additional costs.

With this in mind, it is important to have in place a clause in your contracts which allow for variations for unexpected additional project costs.

The construction industry has become accustomed to changes in legislation that directly or indirectly impact the sector.

One such major change, which came into effect in March 2021, affects businesses connected to the construction industry. The new rules fundamentally change the way they manage their VAT processes.

You can read more about the new reverse charge VAT rules here.

A detailed financial statement will help you understand your company’s financial situation and make the necessary adjustments to improve your bottom line and future sustainability.

Our construction specialists can help you make sense of the figure to understand the key strengths of your business as well as any challenges or weaknesses that you need to address. Of course, the other important thing you need to know – is my business making money and if so how much – will also be answered.

We can look at the projects that have already been completed as well as those in development and check your profit margins.

By keeping track of your financial statements year on year, you can track how your business is performing and make any adjustments to help you reach your targets.