Construction bookkeeping: Keeping your books connected to the jobsite
Key takeaways:
Reliable construction bookkeeping provides the foundation for job costing, cash flow analysis, and financial reporting, and other important financial planning.
Consistent coding helps you assign income and costs to the right jobs and compare expense categories across projects.
Payment records should show what’s been billed, paid, and still owed, with retainage and disputed amounts tracked separately.
Clear responsibilities and handoffs keep information moving between field teams, project managers, bookkeepers, and finance leaders.
Capture records daily, resolve questions and billing issues weekly, and reconcile accounts and review project reporting monthly.
What is construction bookkeeping?
Construction bookkeeping is the process of tracking, documenting, reconciling, and reporting on financial transactions associated with construction projects.
It’s that multiple jobs part that can make the process tricky. At any given point in time, your construction company might have crews working on different jobs, equipment rentals shared among sites, and supplier invoices that cover materials for different projects. Construction bookkeeping is the way you make sure all of those transactions are recorded in enough detail to show where the income and costs should be allocated (or assigned).
On top of that, construction bookkeeping includes both payments received and sent out. Whether you’re billing as work progresses or paying subcontractors for multiple projects, you need to know what’s been billed, what’s been paid, and what you still owe.
If you do all this well, you’ll have reliable information to use as a foundation for job costing, cash flow analysis and financial reporting. If you don’t, you can find yourself missing payment deadlines, performing below expectations, and feeling unsure about how to move your company forward.
PRO TIP >> Accurate bookkeeping is the key to perfecting your operating budget
What information should construction bookkeeping capture for each job?
When it feels like there are a million pieces of financial information coming at you each day, how do you determine which information you need to capture as part of your construction bookkeeping processes?
The answer will vary depending on your unique business situation, but the list below is a solid place to start!
Coding
Every job should have a unique identifier that is used to track transactions from estimate to job expenses to accounts payable. The same goes for different categories of expenses like equipment rental or specific kinds of materials. Consistent coding makes it easy to report on a specific job or to analyse how category costs are adding up across all jobs.
Labor
Knowing how much you paid out for labor isn’t enough. You’ll want to keep track of each employee’s work hours and tasks with assigned job code, regular vs overtime hours, pay rates, gross wages, and payroll dates. Payroll taxes and benefits should be documented as should workers’ comp costs.
Materials and equipment
Because materials and equipment can get split across jobs, documentation has to be both thorough and well coded. Keep documentation of suppliers, POs/invoices, quantities, prices, taxes, delivery charges, and make sure to code each with the appropriate job identification so you know how to allocate each cost. And, don’t forget rentals! Rental dates, equipment usage, returns and credits all need to be tracked.
Change orders
Change orders can be a sticky area for bookkeeping because they can vary so widely. Keep records of scope adjustments, proposed and approved amounts, approval dates, and all supporting documentation. Make sure to draw a clear line between approved changes and the effect on contract value as well as change-associated billings and payments.
Customer billing and receipts
This category goes beyond saving invoices. Make sure you track billing periods or milestones, total billed per project and across projects, current amount due (and overdue), and payment terms. Match all incoming payments to invoices and record payment dates, partial payments, and any remaining balances. Disputed amounts and retainage should be tracked separately and should include release conditions and amounts collected.
Supplier and subcontractor payments
This is another area of construction bookkeeping that can vary broadly. Always track each vendor as well as payment-specific invoice numbers, job and cost codes, invoice and approved amounts, payment terms and due dates. For each payment, make sure you document payment amount, remaining credits or balances, and retainage withheld or released. It’s helpful to also keep a problem list of unresolved approvals, missing documentation, or invoice disputes that need further attention.
Who’s responsible for gathering info from the jobsite?
Construction bookkeeping requires strong coordination between team members on the jobsite and those in the office. Clear role definition and hand-off processes keep information from falling through the cracks.
| Role | Responsibilities |
|---|---|
| Field teams and supervisors |
|
| Project managers |
|
| Construction bookkeeping team |
|
| Owner or finance lead |
|
How to pace your construction bookkeeping
Part of the procedural responsibility that lies with the owner or finance lead is setting a regular schedule to make sure that documentation happens in a timely manner and that the documentation is structured in a way that makes it valuable as work progresses and for longer-term financial strategic planning.
Again, each company will need a slightly different approach, but the breakdown below will give you a good place to build from.
Daily construction bookkeeping
There are two main categories of information you’ll want to track daily: jobsite records and new financial transactions.
For jobsite records, you’ll want to confirm that receipts, delivery times and quantities, equipment usage and labor type and time are being captured and coded appropriately. Make sure that all supporting documentation is complete and legible. If information is missing, follow up with the field team as quickly as possible.
Financial transactions should also be a daily tracking task. Incoming supplier invoices, customer payments, and any bank activity should be checked for missing information, duplicate entries or incorrect coding. Immediately matching payments to their relevant invoice and flagging urgent due dates will help keep processes smooth down the line.
Weekly construction bookkeeping
Your weekly routine should be about resolving questions and flagging potential challenges ahead to keep your financial processes running smoothly. If there are any outstanding doubts about uncoded costs, missing invoices, unapproved timecards and the like, make sure to route those questions to the appropriate field team, project manager, finance leader or even the owner if necessary.
You’ll also want to keep a close eye on billing and accounts payable workflows. Make sure that the finance team is aware of milestone progress, approved changes and retainage status. If there are missing approvals or documentation that could slow down invoicing, payment or collection, this is the time to track them down.
Monthly construction bookkeeping
Your monthly tasks should focus on reporting and reconciliation. Reconcile all bank and credit card accounts. Check your receivables and payables. Look over payroll numbers. Match retainage balances to their supporting records. And most importantly, check that job cost totals agree with the general ledger.
Project reporting is equally important. Review late invoices, missing costs, and any unusual job balances with the project managers. Provide checked costs and billing for WIP schedules and update progress and remaining cost estimates. Coordinate with the PM to discuss budgets and make sure billing and cost estimates are up to date and adjusted.
How Aerial makes construction bookkeeping a breeze
Chasing receipts every day? Untangling job costs at the end of the month? Losing track of who owes what for what? Fast-growing construction companies face these challenges every day, and we’re experts at helping tame the bookkeeping chaos!
We’ll work with your team to clarify responsibilities, improve processes, and handle your end-of-month routine so you have all the information you need to make good business decisions and stop missing deadlines.
Whether you need ongoing bookkeeping support or help fixing a process that’s falling behind, we can help! Schedule a call with one of our construction finance professionals today to learn how.
