Construction accountants: all you need to know

If you run your own construction business, whether as a sole trader or limited company, you might want to hire a construction accountant or construction bookkeeper. Having an experienced construction accountant can be integral to the success of your business.

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It doesn’t matter if you’re just starting a construction management company or looking to grow your construction business even further, a construction accountant can help. From optimising cash flow and giving expert advice on your business’s structure, planning and profitability, it’s something worth considering.

In this guide, we look at what a construction accountant does and how their help can benefit you and your construction business.

What does a construction accountant do?

Let’s start by taking a look at the common tasks that a construction company accountant will typically be responsible for.

Basic accounting for any business is essentially looking at profit and loss, and trying to ensure the business has a healthy cash flow.

When you’re dealing with a construction business, accounting for construction companies usually includes project accounting as well – which involves looking at the revenue, cost, and profitability of a project over time.

Common tasks for a construction accountant

Here are some of the tasks that a dedicated construction accountant will carry out for your business:

• Accounting – They’ll help you manage your day-to-day accounts, use them to measure the success of your construction business, and provide specialist accounting advice and training when needed

• Audit – A construction business will usually have a number of elements that can make the auditing process slightly complex, which means it’s useful to have the help of an expert

• Tax efficiency – One of the most impactful ways a construction company accountant can help is by proactively finding ways to save your business money by being as tax efficient as possible

• Expert accounting advice – An experienced local construction accountant will be able to provide valuable advice on the latest legislation, any industry requirements, or on specialist schemes, such as the CIS (Construction Industry Scheme)

• Business structuring – A good construction accountant will have the skills and experience to help you create the most effective financial structure for your business

• Raising funds – When you need to generate funds for your business, an accountant can help you look in the right places and secure the finances you need to grow your business

• Project accounting – When you have numerous projects throughout the year generating their own revenue and costs, a construction accountant will help you stay on top of the individual project accounting

Construction accountant vs construction bookkeeper

When it comes to the type of help that you need for the finances of your construction business, it’s important to understand the difference between a construction accountant and a construction bookkeeper.

As a quick overview, construction bookkeeping involves the recording and organising of your business’s financial transactions to keep your books in order.

Accounting is a level up from bookkeeping and a construction accountant will interpret, analyse, and report on the financial data for your business – and potentially offer advice and guidance on the wider aspects of your business.

To find out more, check out our guide on the difference between bookkeeping and accounting.

What type of accounting is used in construction?

For most construction businesses, there are generally two main types of accounting used in construction:

1. Project-level accounting (sometimes known as construction contract accounting)

2. Business-level construction accounting

Construction project accounting (or construction contract accounting)

Due to the nature of construction, projects are often at the core of the financial performance of a construction business and construction project accounting focuses on that process.

Construction project accounting uses the project (or contract) as the basis of the accounting, looking at the financial details of various aspects of each project, including:

• Project schedule

• Project budget

• Any deviations from the contracted work

• Any defects in the project and their financial implications

• Reviewing whether the work is getting done right the first time, or incurring additional costs

By looking at the financial performance throughout the life of each project, a construction company accountant can constantly measure the real on-site costs compared to the anticipated contracted costs.

Once a project is complete, the construction accountant can measure the profitability of the project compared to the key milestones of the original contract.

Business-level construction accounting

At a broader level than project accounting, business-level construction accounting looks at the business as a whole to measure financial performance.

Business-level construction accounting will usually look at financial details, such as:

• Cash flow and incoming cash

• The pipeline of upcoming work

• Productivity of workers

• Profit margin and overall profitability of jobs

The key focus of business-level construction accounting is to make sure that all aspects of the business are contributing to a healthy cash flow and a consistent, profitable performance for the business.

Construction in process accounting

When a construction business is carrying out a major project, such as a building or other large construction job, you’ll need construction in process accounting (also known as construction work in progress accounting).

This refers to the management of accounts during the life of the project, which often involves using a specific account to accumulate all the costs over the course of the project – often referred to as a ‘construction work in progress’ account.

Benefits of hiring a construction accountant

If you’re still on the fence about hiring a construction accountant or construction bookkeeper, here are some of the benefits for you and your business.

An experienced construction company accountant can:

• Help you avoid cash flow issues and keep your business afloat

• Reduce your expenses by identifying and minimising costs such as mileage, deliveries, travel time, and materials

• Make your business as tax-efficient as possible, whilst adhering to current tax laws and regulations (and preparing for future laws and regulations)

• Give you peace of mind that a professional is in charge of your accounting and is at hand to help your business grow

• Save you time by carrying out accounting tasks much quicker and more efficiently than someone inexperienced in construction accounting

• Advise on what construction insurance you may need in order to protect you, your employees, and your company

Wondering what it costs to hire an accountant? We've got just the guide for you: How much does an accountant cost?

Tips for good accounting for a construction company

Here are some of our top tips when it comes to accounting for a construction company:

• Prioritise cash flow to ensure you always have access to healthy finances

• Make sure you price accurately for the construction projects you work on

• Always take time to understand all the terms of your construction contracts

• Focus on setting up the right structure for your business

• Allow your business time to grow by limiting how much work you take on in the early days

• Insist on consistent, well-documented record-keeping so that you avoid any problems with HMRC

• Enlist the help of a construction accounting professional to support you and your business and help it grow

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