Small builders and contractors often juggle multiple projects, suppliers, and subcontractors, making financial management a significant challenge. This is where Construction Bookkeeping and Accounting Services become essential. These services are specifically designed to help small construction businesses streamline their financial processes, improve profitability, and ensure compliance with tax regulations.
In this article, we’ll explore everything small builders need to know about Construction Bookkeeping Services, including key duties, accounting practices, and recommended tools.
What is Construction Bookkeeping Service?
Construction Bookkeeping Services involve the management and organization of financial transactions specific to construction businesses. Unlike general bookkeeping, construction bookkeeping focuses on project-based accounting, meaning each job or project has its own set of financial records.
This service includes tracking project costs, managing subcontractor payments, handling job costing, and ensuring compliance with industry-specific regulations such as construction contracts, retentions, and project milestones. It provides small builders with clear financial insights, helping them make informed business decisions and avoid costly errors.
What is the Difference Between Regular and Construction Bookkeeping Service?
The key distinction between regular bookkeeping and Construction Bookkeeping Services lies in how financial data is organized and used.
Regular Bookkeeping:
- Records standard business transactions (income, expenses, payroll, etc.).
- Typically focuses on single-entity, business-wide financial management.
- Involves standard reports like profit and loss statements and balance sheets.
Construction Bookkeeping:
- Tracks costs and income at the project or job level (job costing).
- Handles project-based billing (progress billing or milestone billing).
- Manages subcontractor payments and retentions.
- Includes compliance with specific construction industry requirements.
- Offers detailed reports per project to monitor profitability and cash flow.
Here’s a clear comparison of Regular Bookkeeping vs Construction Bookkeeping Service in a table format:
| Aspect | Regular Bookkeeping Service | Construction Bookkeeping Service |
|---|---|---|
| Purpose | General financial recordkeeping for any business type. | Project-specific financial management tailored for construction. |
| Focus | Overall business income, expenses, payroll, and reporting. | Job costing, project budgets, subcontractor payments, and billing. |
| Billing Type | Standard invoicing and payment tracking. | Progress billing, milestone billing, and retention tracking. |
| Expense Tracking | General categorization of income and expenses. | Allocating expenses to specific jobs or projects (job costing). |
| Subcontractor Management | Basic vendor management. | Handles subcontractor compliance, payments, and documentation. |
| Payroll | Employee payroll processing. | Payroll plus subcontractor labor tracking, with compliance. |
| Reporting | Business-wide financial reports (P&L, balance sheet, cash flow). | Detailed project-specific reports plus overall business reporting. |
| Compliance | Standard tax and financial compliance. | Includes construction-specific compliance (e.g., retentions, contracts). |
For small builders, Construction Bookkeeping Services are critical because they provide a clear picture of which projects are profitable and which are over budget.
The Five Duties of a Bookkeeper in Construction
A bookkeeper in the construction industry plays a crucial role in maintaining financial health and ensuring smooth project execution. Here are the five core duties of a construction bookkeeper:
1. Job Costing
Construction bookkeepers allocate every expense—labor, materials, subcontractors, and overheads—to specific projects. This ensures that each job’s profitability can be tracked accurately.
2. Accounts Payable & Receivable
They manage payments to suppliers and subcontractors while ensuring timely collection of client payments. This is vital for maintaining a healthy cash flow, especially in project-driven businesses like construction.
3. Payroll & Compliance
Construction bookkeepers handle payroll for employees and subcontractors while ensuring compliance with superannuation and tax regulations. They also manage certificates of compliance for subcontractor payments.
4. Progress Billing & Retention Tracking
Unlike regular businesses, construction projects often use progress billing, where clients are invoiced based on project milestones. Bookkeepers track these stages and manage retention amounts withheld until project completion.
5. Financial Reporting
They provide project-specific financial reports, such as job profitability reports, cash flow statements, and budget variance reports, which are crucial for builders to make informed financial decisions.
What is a Construction Bookkeeper?
A construction bookkeeper is a financial specialist trained to manage the complex financial structure of construction businesses. They understand how to record project-specific transactions, manage subcontractor documents, handle progress billing, and ensure all financial activity aligns with Australian industry standards and tax laws. Small builders often rely on these professionals to handle both day-to-day bookkeeping and more advanced construction accounting tasks.
What are Construction Accounting Costs?
Construction accounting costs refer to the expenses recorded as part of project-based accounting. These costs include:
- Direct labor: Wages paid to workers assigned to specific jobs.
- Materials: Purchase of raw materials and supplies used in construction.
- Subcontractor payments: Payments to external contractors working on your projects.
- Equipment rentals: Costs of leasing or renting construction equipment.
- Overheads: Utilities, insurance, permits, fuel, and other indirect costs that support project completion.
Accurately tracking these costs ensures each project’s financial performance is fully transparent.
How Do You Record Construction Expenses?
Construction expenses are recorded using a job-costing system. This method assigns every expense to a specific project or job code, allowing for detailed financial tracking. Here’s how it works:
- Create a job code for each project.
- Categorize each expense (labor, materials, subcontractors, etc.).
- Allocate expenses to the corresponding job.
- Review reports regularly to assess project profitability.
By using job-costing, small builders can easily monitor budgets, detect cost overruns, and adjust project scopes when necessary.
What Type of Accounting is Used in Construction?
The most common method is job cost accounting, which focuses on individual project profitability by allocating costs and revenues to specific jobs.
Additionally, many construction businesses use the percentage-of-completion accounting method for long-term contracts. This method recognizes revenue and expenses progressively based on the project’s completion stage, ensuring financial statements reflect the true financial health of ongoing projects.
What is the Best Accounting Software for Construction?
Several software solutions are tailored to meet the unique needs of construction businesses. Some of the best include:
1. Xero (with Construction Add-ons like WorkflowMax or Tradify):
Cloud-based with excellent job-costing and payroll integrations.
2. QuickBooks Online (with Buildertrend or Procore integrations):
Ideal for small builders looking for easy invoicing, payroll, and construction project management tools.
3. Sage 300 Construction and Real Estate:
A powerful ERP-level solution for medium to large construction companies, offering in-depth financial and operational management.
4. COINS Construction Cloud:
An end-to-end solution designed for project control, financial management, and subcontractor management.
5. Viewpoint Vista:
Suitable for growing construction companies needing advanced project accounting, payroll, and compliance tools.
Conclusion
For small builders, navigating the financial complexities of multiple projects requires more than basic bookkeeping. Construction Bookkeeping Services and Construction Accounting Services provide tailored solutions that track every dollar, ensure regulatory compliance, and deliver valuable project insights.
Investing in professional construction bookkeeping will help your business stay organized, profitable, and ready for growth.
