The RIGHT Way to Manage Accounting for Construction Projects

If you're running a construction business, you’ve probably got a million things to juggle—crews to manage, materials to order, jobs to bid on. 

And somewhere in the middle of all that, the accounting has to get done.

But if you’re like a lot of our clients, the financial side can feel confusing (or just straight-up overwhelming). 

How do you know if you’re making money on a job?

What’s the right way to track payments and expenses?

And is your system actually helping you, or just slowing you down?

This guide walks through how to set up your accounting for construction projects the right way—step-by-step, in plain English. No accounting degree required.

Let’s dive in.

‍

Step 1: Set up a system (and don’t overthink it)

First things first—you need a system.

It doesn’t have to be fancy. It just has to exist.

At the very least, that means using accounting software. You don’t need some crazy construction-specific platform right out of the gate, but it is helpful if the tool you use can handle job costing, invoicing, and tracking what’s owed to you (and what you owe). QuickBooks works great for a lot of construction businesses. Xero too. Just don’t try to do it all in a spreadsheet forever. That road leads to tears.

And whatever you pick, stick with it. Log everything. Every expense, every deposit, every invoice. Your future self will thank you.

‍

Step 2: Use accrual accounting (even if it sounds boring)

I know. This sounds like a "CPA word." But it’s important.

You’ve got two ways you can do accounting: cash and accrual.

• Cash basis means you only record income when the money actually hits your account, and expenses when the money actually leaves.
  
• Accrual basis means you record income when you earn it and expenses when you incur them—even if you haven’t been paid yet.
  
  

Construction projects are long. You often do work in March, bill in April, get paid in June. If you’re using cash basis, it’s like trying to judge how a project’s doing with half your financials hidden. Accrual gives you the real picture. That’s what you want when you’re making decisions.

So yes, accrual is more work upfront, but it makes everything else easier and more accurate. If you're not sure how to switch or set this up, that’s where your accountant (hi, that’s us!) comes in.

‍

Step 3: Track what’s owed to you—and what you owe

This is where a lot of contractors get tripped up.

You send out an invoice, and then… forget about it. Or you get a bill from a supplier, but it gets buried in your truck console.

You need to track:

• Accounts receivable (AR) = what customers owe you
  
• Accounts payable (AP) = what you owe others
  
  

If you don’t keep tabs on these, you’ll always feel like you’re out of money—or worse, miss a payment and mess up a vendor relationship. Set reminders to check in weekly. Make sure old invoices don’t sit unpaid. The faster you collect, the better your cash flow.

‍

Step 4: Get serious about cash flow (this is the key)

You know what kills most construction businesses? Not lack of work. It’s cash flow.

You might be “profitable” on paper but broke in real life because you haven’t gotten paid yet.

Here’s how to protect yourself:

• Take deposits: Don’t start work without one. It’s totally normal to ask for 25–50% upfront.
  
• Use progress billing: Don’t wait until the end of the job to send one giant invoice. Bill as you go. For example, after demo, after framing, after rough-in. Break it up.
  
• Deposit payments ASAP: Don’t let checks sit on the dash of your truck. The sooner that money’s in your bank account, the sooner you can use it to pay your crew or cover materials.
  
• Push out your payables: If vendors offer net 30 or net 45 terms, use them. Don’t pay bills earlier than you need to unless you’re getting a discount.
  
  

Basically: get paid fast, pay slow (within reason). That gap = your cash flow cushion.

‍

Step 5: Get your team on board

Finally, none of this works if it’s just living in your head.

Your office manager (or cousin who helps with admin) needs to know how to enter expenses properly. Your project managers should understand why progress billing matters and how to get it out the door on time. Even your crew should understand that receipts and time tracking aren’t optional.

Take 30 minutes and walk everyone through your system. Write up a simple checklist. Make it part of the job.

‍

TL;DR (too long; didn’t read)

Here’s the short version:

• Pick an accounting system and stick with it
  
• Use accrual accounting so you can actually see what’s going on
  
• Watch your receivables (money owed to you) and payables (what you owe)
  
• Manage your cash flow like your business depends on it—because it does
  
• Teach your team the basics so the system works
  
  

And if you’re feeling overwhelmed? That’s normal. This stuff isn’t intuitive, and it’s not why you got into construction. But it’s how you build a business that lasts.

‍

Need help making sense of all this?

Here at Atlas Accounting Group, we work with construction businesses every day to clean up the books, speed up payments, and make sure you’re actually making money on your jobs. 

‍

If you’re ready to get your accounting dialed in, reach out to us over on our Contact Page here. We’ll help you build a system that actually works.

‍

Until next time!