Construction
Accountant.

Our friendly team of accountants deliver comprehensive accountancy services for the building, contractor, and construction industry to help make you and your business tax efficient. Our clients include sole traders to national construction companies in both the public and private sector. 

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Accounting Solutions 

Our expert team will help grow your business with effective accounting solutions. We provide comprehensive services from Bookkeeping to Year End Accounts, delivering key financial services. 

 

Construction Industry Scheme (CIS)  

Our knowledge and experience of the construction sector will help you navigate the legislation surrounding accounting for the building industry. Under the CIS scheme contractors deduct money from a subcontractor's payments and pass it to HM Revenue and Customs (HMRC). The deductions count as advance payments towards the subcontractor's tax and National Insurance. 

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As a business, if you pay subcontractors to carry out work you must register as a contractor with the Construction Industry Scheme (CIS). Sub contractor activities include: 
 

• Site preparation 

• Alterations 

• Dismantling 

• Construction 

• Repairs 

• Decorating 

• Demolition 

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As a sub contractor if you do not register under CIS, you are subject to is a higher tax rate of 30%, rather than the basic 20% rate. 

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How is construction accounting different to standard business accounting? 
 

All businesses, including construction companies, must follow ‘Generally Accepted Accounting Principles’ (GAAP). All businesses that publish financial records follow these processes and procedures to ensure reports are accurate. 
 

However, construction accounting differs from standard business accounting due to the complex nature of the industry.  In addition to standard accounting: accountants payable, accounts receivable and payroll, construction accounts need to include retention, job costing, change order management, progress billings, and customer deposits. 
 

The services and products provided by the construction sector have a wide scope and include categories such as consulting, engineering, labour, design and physical products Each ‘sale’ varies hugely in scale, time, and overheads which can distort profitability. As a result, income and revenue is typically tracked on a project basis.  

 

Project based Accounting 
 

In the construction industry your company can be working on multiple projects at a time – invoicing and income can have a long lead time from completion of a project which results in overheads fluctuating from month to month.  Project based accounting uses job costing, a method that records financial records in separate profit centres. This type of accounting focuses only on transactions that directly apply to that project, excluding external overheads.  

 

Accounting Methods For Construction Companies 
 

To ensure the success of your construction company, allocating project costs accurately is an important process. Depending on the size of your business you may choose a particular accounting method. Methods used in construction accounting include: 
 

• Cash basis – With this method you record your revenues when they’re received and any expenses when they’re paid. This method is the simple and easy to manage. 

• Accrual basis – This method recognises revenue as work that’s been completed and expenses when they happen. Providing a real time view of your business, the accrual method provides an accurate assessment of your business’s financial health. 

• Percentage of completion method (PCM) - Income and expenses are reported the year they occur, making it easy to avoid major tax changes. This method is suitable for long term projects and will help with cash flow. 

• Completed contract method (CCM) - This method recognises all the revenue, profit and expenses associated with a project only after the contract is fulfilled. This is suitable for short term projects. 
   

Speak to one of our specialist accountants to discuss which method is most suitable for your construction company. Call: 01420 541 554.