Accounting Tips for Construction Businesses

Why construction accounting is different

Most accounting advice assumes you sell a product off a shelf and get paid at the till. Construction doesn't work that way. A single project can run for months, span dozens of cost lines, involve subcontractors and suppliers, and get paid in stages — with a slice held back until the client is happy.

That means a contractor's 'profit' is spread unevenly across time and across jobs. You can be busy, invoicing plenty, and still run out of cash because money is tied up in materials you've bought and retentions the client is holding. Good construction accounting is really about answering two questions clearly: which jobs make money, and where is my cash right now?

Job costing: know your profit per project

Job costing means tagging every cost and every invoice to a specific project, so each job has its own mini profit-and-loss. Do this and you'll quickly see that the busy jobs aren't always the profitable ones.

• Materials — timber, cement, fixtures, anything bought for that job.
• Labour — your own crew's hours plus any casual hire, costed at their real rate.
• Subcontractors — electricians, plumbers, plasterers billed to the job.
• Plant and equipment — hire costs, fuel, and a share of owned-machine running costs.
• Overhead allowance — a slice of insurance, office and admin so quotes aren't secretly loss-making.

Retentions: the money you've earned but not banked

On many contracts the client holds back a percentage of each payment — commonly 5% to 10% — as security until the work is finished and any defects are fixed. This is the retention (or 'retainage'). It's real revenue you've earned, but it can sit uncollected for months after a job ends.

The mistake small firms make is forgetting it exists. Record retentions as a separate receivable the moment you raise the invoice, note the release date or trigger (practical completion, end of defects period), and chase them like any other unpaid invoice. A simple retentions list — job, amount held, release condition — can be worth thousands of recovered cash a year.

Progress billing: get paid as you build

Waiting until a project ends to invoice is a fast route to a cash crunch. Progress billing (or stage/milestone billing) means you invoice for work completed to date at agreed points — for example on foundations, first fix, and handover.

1. 1

   Agree the schedule up front

   Write the payment stages into the contract, tied to clear milestones or a percentage of completion, so there's no argument later.

2. 2

   Value the work done

   At each stage, measure what's actually been completed and value it against the contract sum — this is your application for payment.

3. 3

   Invoice the stage, less retention

   Raise a progress invoice for the stage value, deducting any agreed retention, and apply the correct tax treatment for your country.

4. 4

   Track outstanding and retained amounts

   Keep running totals of what's billed, paid, and still retained per job so nothing slips through.

Tax, VAT/GST and staying compliant

Construction often has special tax rules — reverse-charge schemes, reduced rates on certain works, or withholding on subcontractor payments — that vary a lot by country. The core habit that protects you everywhere is the same: keep every supplier invoice and receipt, record the tax on each, and reconcile regularly so your return matches your books.

This is general information, not tax advice. Construction tax treatment differs by country and changes often — confirm the current rules with your country's tax authority or a qualified local tax professional before filing.

Whatever your local tax (VAT, GST, sales tax or none), the goal is to always know how much tax you've collected on invoices versus paid on purchases, and to have the paperwork to back it up if you're ever audited.

Cash flow: the number that actually keeps you open

Profit on paper won't pay your suppliers on Friday. Contractors typically pay for materials and labour before the client pays them, so a growing firm can run short of cash exactly when it's winning more work.

Forecast cash weekly: expected payments in (including retention releases), against commitments out (supplier bills, wages, subcontractors, tax set-aside). Build in a buffer, invoice progress stages promptly, and don't let retentions drift — they're often the difference between comfortable and stretched.

How Tallium keeps it all in one place

Spreadsheets can do job costing, but they fall apart when the same numbers need to live in your invoices, your inventory and your tax return at once. Tallium is one all-in-one app — accounting, invoicing, inventory and POS under a single account — so a material bought for a job flows straight into that job's cost, your stock count, and your books without re-keying.

Because receipt scanning and categorisation are AI-automated, you can photograph a supplier invoice on site and have it costed to the right job in seconds. Progress invoices, retention tracking and tax handling sit in the same place, and AI insights flag which jobs are drifting over budget.

Every plan includes unlimited users with no per-seat fees, so your site staff, office and bookkeeper all work from the same data. Pricing is one simple flat rate in US dollars, billed monthly from signup, cancel anytime — no free trial. Shop/store is $79, warehouse $99, online store $159 and factory $269 per unit per month, each including the full accounting core.