Keeping projects profitable is hard enough without chasing paperwork and deciphering deductions. If you run a building firm, the foundations of good finance are simple: clear records, timely reporting, and tools that cut admin rather than add to it. This blog sets out practical steps to tighten accounting processes and bookkeeping for construction companies, with a focus on project costing, subcontractor payments, CIS, and cashflow.
Construction work is rarely linear. Jobs start and stop, scopes change, and materials prices move. Without job-by-job visibility, margins erode before you notice. Equally, paying subcontractors correctly under the Construction Industry Scheme (CIS) is a standing obligation with monthly deadlines. Get it right and you avoid penalties, keep partners on side, and know the true cost of each phase on site. Get it wrong and you could pay out twice – first in deductions and again in penalties.
The sector’s backdrop is mixed. Output nudged up in late 2024 before slipping again month to month, underlining how important cost control remains for 2025/26 planning (ONS, 2025). Late payment pressure hasn’t gone away either – government research shows it is a persistent drag on small firms’ cash positions, with meaningful knock-on effects for suppliers (DBT, 2024). In short, construction businesses that standardise processes and embrace digital tools will find it easier to price work, manage suppliers, and stay compliant. That is where strong accounting support pays for itself.
The sector’s accounting challenges at a glance
Project-based costs: Getting to true job margin
Each project needs its own mini–profit and loss. Direct labour, subcontractor costs, plant hire, and materials must be captured against the right job code. Small gaps add up: missed delivery charges, unused materials, or last-minute equipment swaps all chip away at profit.
Subcontractor payments: Verifying and paying the right amount
Before you pay a subcontractor, you must verify them with HMRC and apply the correct deduction rate: 20% if registered, 30% if unregistered, and 0% for those with gross payment status. Your monthly CIS return is due by the 19th following the tax month. These rules shape cashflow and compliance, so process discipline matters.
CIS compliance: Record-keeping is non-negotiable
You must report payments and deductions every month, even if it is a nil return. Returns include declarations around employment status and verification of subcontractors, so accurate records and timely checks are essential.
Cashflow management: Protecting working capital
Long payment chains and retentions create gaps between cost and income. Government research highlights how late payments strain micro and small businesses’ cash positions – a common pain point across trades and speciality contractors. Tighter credit control, staged billing, and clear payment terms help mitigate the risk.
Bookkeeping for construction companies: What “good” looks like
Job costing you can trust
Set up dedicated job codes before work starts. Capture every direct cost to the correct code, including small items such as waste disposal and parking. Use purchase orders tied to jobs so supplier invoices can be matched automatically and approved fast.
Live project reporting
Monthly accounts are useful, but projects move daily. Dashboards that show committed spend, costs to complete, and earned value help you spot issues early. If labour overruns are trending, you can address resourcing before margin slips.
CIS done the same way, every time
Standardise verification, deduction, and statement processes.
- Verification: Confirm status before first payment.
- Materials offsets: Apply correctly before deduction.
- Monthly returns: File by the 19th.
- Statements: Issue promptly to subcontractors.
Building these steps into your pay-run workflow reduces rework and HMRC queries.
Cashflow discipline on each project
Tie applications for payment to milestones, and agree valuations in writing. Use aged debt reports and set escalation steps for overdue balances. Consider early-payment discounts for reliable clients and tighter terms where there’s a history of delay. The aim is predictable inflows to fund labour and materials without leaning on expensive credit.
Digital tools that save time on site and in the office
Choosing software that fits construction workflows is as important as the brand on your drill. Look for:
- Project codes: Job creation should be quick, with templates for typical works and cost categories.
- CIS automation: The system should verify subcontractors, calculate deductions after allowable offsets, and generate the HMRC return due on the 19th.
- Mobile capture: Photograph purchase invoices and delivery notes, log hours by job, and approve on the go.
- Integration: Connect your ledger with job costing, payroll, and project management so you are not duplicating data.
- Audit trail: Every adjustment and approval should be traceable.
Looking ahead, Making Tax Digital for Income Tax will affect many sole traders and landlords from April 2026, increasing the value of well-organised digital records. Put the right system in now and the transition will be smoother when that change lands.
Controls that keep projects profitable
Minor controls, applied consistently, protect margin:
- Authorisation: Require purchase orders for plant hire and high-value materials.
- Confirm before you pay: Purchase order, delivery note, and supplier invoice should align on quantity, price, and job code.
- Subcontractor onboarding: Collect UTR, insurance, right-to-work checks, and CIS status before first payment.
- Progress reviews: Compare estimated versus actual costs and re-forecast completion.
- Retention tracking: Keep a log by job and due date to avoid leaving cash on the table.
How we help construction businesses stay compliant and organised
We work with construction SMEs across trades, from groundworks to electrical and fit-out. Our role is to take the strain out of bookkeeping for construction companies, so owners and site managers can focus on delivery:
- CIS administration: Verification, deductions, monthly returns by the 19th, and subcontractor statements – all handled with clear records for audit.
- Job costing and reporting: Set-up of codes and cost structures, plus monthly and project-level reporting that highlights profit at completion.
- Cashflow support: Forecasting, credit control processes, and funding conversations where needed. The aim is steadier inflows and fewer surprises.
- Digital roll-out and training: Selecting and implementing software that fits the way you build, with onboarding for your team and ongoing support.
- Compliance and filings: From VAT and payroll to year-end accounts, so your statutory deadlines are met without stress.
If you want to see how we approach this, start with our bookkeeping services page.
Bookkeeping for construction companies: Practical next steps
If you are tightening processes for the 2025/26 tax year, pick a few improvements and apply them across every job. Consistency beats complexity. Start by agreeing how projects are set up, who approves spend, and how often you review job performance. Add CIS checks to your onboarding list and automate the monthly return so the 19th is never a scramble. These habits remove friction, protect margins, and keep you compliant.
Financial discipline is not about adding admin. It is about making every pound of cost visible and every invoice collectible. In a market where output can shift month by month and late payment pressure persists, steady controls and simple, digital workflows will keep your business resilient. We can help you implement the right structure fast – from job costing to CIS and monthly management accounts – and keep it running while you deliver work on site.
If you want straightforward bookkeeping for construction companies, let’s talk. We will map your jobs, set up clean processes, and give you reporting that makes decisions easier. Contact us to get started and see how better bookkeeping can support profitable projects and timely compliance this year.