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Construction And Contractors
Construction accounting lives or dies on job-level accuracy.
A construction business can be profitable overall and losing money on half its jobs. Without cost tracking at the job level, the income statement conceals exactly the information the owner needs to bid the next one.
Steingard Financial maintains construction books around the things the work actually turns on: jobs, change orders, retainage and subcontractor payments.
What makes these books different
Job costs are pooled rather than tracked
Materials, labor and equipment posted to company-wide accounts cannot be attributed back to the job that consumed them.
Retainage and progress billing distort cash
Revenue recognized on a schedule and cash received on another makes the bank balance a poor proxy for how the business is doing.
Subcontractor documentation is incomplete
W-9s, insurance certificates and correctly attributed payments are needed long before 1099s are due.
What the service includes
- Cost tracking at the job level for labor, materials and equipment
- Progress billing and retainage recorded and tracked
- Change orders reflected against the originating job
- Subcontractor payment tracking, W-9 collection and 1099 preparation
- Equipment purchase, loan and lease tracking
- Monthly financial statements by job and for the business as a whole
How the engagement works
Map the job structure
Steingard establishes how jobs, phases and cost categories should be represented so reporting matches how the business estimates and bids.
Bring current jobs into the structure
Open jobs are brought onto the same basis so in-progress work reports consistently against completed work.
Report monthly by job
The close produces both company-level statements and job-level cost detail on the same calendar.
What is different here
Why contractor books break in ways other service businesses do not
A contractor’s profit is not made at the company level. It is made or lost on individual jobs, and books that only report a company total cannot tell you which.
Profit lives at the job, not the month
A strong month can contain two profitable jobs and one that lost money, and the monthly total will hide that permanently. Without cost coded to jobs, the only signal you get is that something went wrong somewhere.
Cash and revenue diverge sharply
Progress billing, deposits taken up front and retainage held back all move cash out of step with work performed. A profitable job can starve you of cash for months, and a healthy bank balance can be someone else’s deposit.
Change orders decide the margin
Work performed before a change order is approved and recorded is work that may never be billed. It is one of the most common places contractor margin quietly disappears, and it is a record-keeping failure rather than an estimating one.
None of this requires unusual accounting. It requires that cost is captured against the job it belongs to at the point it is incurred, which is the habit that makes everything else answerable.
Where this fits best
- General contractors running multiple concurrent jobs
- Specialty trade subcontractors
- Remodelers and design-build firms
- Businesses that are bonded or that must present statements to a lender
- Companies bidding work that needs accurate historical cost to price it
What the books need to handle
The mechanics that matter in construction
These are the areas where contractor bookkeeping differs from ordinary service bookkeeping, and where cleanups usually concentrate.
- Job costing that people actually use. Labour, materials, subcontractors and equipment coded to the job as they occur. Reconstructing this after the fact is possible and rarely accurate.
- Retainage tracked as its own balance. Amounts held back are earned but unpaid. Left inside ordinary receivables they are invisible, and forgetting to invoice released retainage is common.
- Progress billing matched to work performed. Billing ahead of or behind progress distorts both revenue and the picture of which jobs are healthy.
- Subcontractor records kept current. Details and payment totals maintained through the year rather than assembled in January — see sales tax and 1099 filing.
- Equipment separated from consumables. A purchase that should be capitalised and one that should be expensed look identical on a card statement and are treated very differently.
Whether a contract requires a particular revenue recognition method is a question for your tax professional. What bookkeeping does is ensure the underlying job detail exists to support whichever applies.
Frequently asked questions
Do you do job costing, or just the books?
Job-level cost tracking is part of how the books are structured rather than a separate report bolted on afterwards. Costs are coded to jobs as they are recorded, which is the only way the job margin is dependable.
We use construction-specific software. Does that matter?
The recurring process is the same regardless of the tool. What matters is that job cost, billing and the general ledger agree with each other, which is where these setups most often drift.
How is retainage handled?
Tracked separately from ordinary receivables so it stays visible as work performed but not yet collectable. That separation is also what stops released retainage going un-invoiced.
Can you tell us which jobs actually made money?
Once costs are coded to jobs, yes — that is the main thing the structure is for. For prior periods where costs were not coded, the honest answer is that it can be estimated, not reconstructed.
We pay a lot of subcontractors. Is that a problem?
Only if their details are collected at year end rather than at engagement. Kept current during the year, contractor filing is routine.
Why the job level matters
The average of a good job and a bad one is a misleading number.
Company-level profitability tells a construction business whether the year worked. It does not say which jobs, which crews, which kinds of work, or which customers produced the result — and those are the questions that determine what to bid next quarter.
Job-level tracking is what converts the income statement into an estimating tool. When a completed job can be compared against what it was bid at, the variance is information. When costs sit in a company-wide pool, the same variance is invisible.
This is a structural decision more than a bookkeeping preference. It is far easier to establish the job structure and carry it forward than to reconstruct job costs from twelve months of pooled transactions.
Find out what each job actually earned.
Tell Steingard Financial how the business bids and runs its jobs, and the review will cover what the books would need to report against them.