Engineering & Construction

Construction accounting is a unique form of bookkeeping and financial management. It's designed specially to help contractors track each job and how it affects the company as a whole. While it draws on all the same basic principles of general accounting, it also has several important and distinct features.

Why is construction accounting different?

If you work in the construction industry, you’ll know there’s rarely a fixed business structure. The site manager probably doesn’t employ the other people working on a project. They are likely to be a contractor – and so is everyone else.

Contractors make up the bulk of the construction workforce. They may be working on several projects at the same time, spending a few hours or days on each. They might also employ their own subcontractors to help out.

Temporary workers will come and go as required. And if you do have a formal payroll, it may change on a weekly basis. So compared with a conventional business, this is much more fluid and changeable.

Beware of the cash flow trap

Construction accounting requires caution at times. Let’s say a client wants you to build a new warehouse. You pay for the necessary materials upfront, out of your own business capital.

Then, halfway through the project, the client goes bankrupt. You’re unlikely to receive more than a small percentage of what you’ve paid out for materials. Unless you have enough capital to ride out the storm, you’ll probably go bankrupt too.

This is why it’s important to keep your cashflow balanced. Big expenses should always be matched by big revenues. Invoice your client on a regular basis – and get payment upfront for major materials or labour expenses. If a client's payments stop for any reason, so should your work.

Many small construction firms fail because of bad debts. If you manage your cash flow carefully, you won’t be one of them.

Our experienced team offers a range of services including:

• Advice on cash flow management
• Advice of construction labour focusing on tax and labour law compliance
• Business Advisory
• Maintaining accounting records in compliance with relevant accounting standards