Construction accounting: tracking every project
Construction accounting cannot be done at company level only. Every site has its own budget, its own subcontractors and its own handover schedule. If you cannot see the cost of each project, you find out that a contract lost money only after it is finished.
Project costs and the estimate
Each project collects:
- materials, backed by site issue documents;
- crew wages, including overtime and travel;
- owned or rented equipment and fuel;
- subcontractor work.
Actual costs are compared with the estimate every month, so you see early where the margin goes: materials, labour or rework.
Work in progress
Between the start of work and handover to the client, costs build up as work in progress. How you recognise revenue and costs must be set in your accounting policy and applied consistently. Otherwise results swing from month to month for no real reason, and your bank or client receives figures that are hard to explain.
Subcontractors and acceptance acts
Acceptance acts are the basis for revenue, costs and VAT. The usual risks:
- acts signed late or with volumes that do not match the estimate;
- subcontractors with incomplete paperwork or invoices issued in the wrong period;
- advances paid without a contract or a clear work schedule.
VAT on construction work
Construction work is generally taxed at the standard 20% rate. The tax point depends on the dates of supply, invoice and payment, so advances you receive can trigger VAT before the act is signed. For property developers, residential housing is treated differently for VAT than commercial space, which affects whether VAT paid during construction can be deducted. Look at this before the project starts, not when the first apartment sells.
What the Momentum Consult team does for construction companies
- set up accounting by project and cost centre;
- review acceptance acts and subcontractor invoices;
- calculate VAT on supplies and advances and file returns with the SFS;
- run payroll for site crews and submit monthly reports;
- prepare monthly cost reports compared with the estimate;
- prepare financial statements for banks and clients.
Services that fit construction
Project accounting and VAT are part of our accounting service. For large site crews with timesheets and travel, add payroll and HR. If you need reports for financing or tenders, see financial reporting.
Book a free consultation. Show us how you currently track projects and subcontractors, and we will tell you what needs fixing and how we can take over the books.