Construction bookkeeping is more complex than
standard small business accounting. You have
multiple active projects running simultaneously,
each with its own labor costs, material costs,
and subcontractor payments. You have revenue
that comes in at project milestones — not monthly.
And you have a tax liability that changes
dramatically based on how you recognize revenue.
Most general accountants who work with contractors
do not understand these complexities. The result
is books that are technically correct but
operationally useless — you cannot tell which
projects are profitable, where cash is going,
or what your actual tax liability will be.
This guide covers exactly what to track monthly
to fix that.
- Track revenue and expenses at project level — not just at company level
- Reconcile all bank accounts monthly without exception — every transaction accounted for
- Monitor accounts receivable weekly — unpaid invoices are the most common cash flow killer
"Most construction companies are profitable on
paper and cash-poor in the bank — because their
bookkeeping does not reflect the actual timing
of money coming in and going out. Monthly
reconciliation fixes this permanently."
Run this checklist on the first week of every
month without exception. These are the minimum
financial controls every construction business
needs to operate with confidence.
Bank Reconciliation
Reconcile every business bank account and credit
card against your accounting records. Every
transaction must be matched, categorized, and
coded to the correct project. Any unmatched
transactions must be investigated and resolved
before closing the month.
Accounts Receivable Review
Pull your AR aging report and review every open
invoice. Flag any invoice more than 14 days
past due for immediate follow-up. No invoice
should reach 30 days past due without active
collection activity in progress.
Accounts Payable Review
Review all outstanding bills and schedule
payments to optimize your cash position.
Pay on time to maintain supplier relationships
but do not pay early unless there is a discount
that justifies it.
Job Costing Update
Update actual costs against budget for every
active project. If any project is running more
than 10 percent over budget, flag it immediately
for investigation and corrective action.
Payroll Reconciliation
Confirm that payroll was processed correctly
and that all tax filings are current. Any payroll
tax filing that is late carries significant
penalties — this must be checked monthly.
Job costing is the single most valuable financial
tool a construction business can have. It tells
you the actual profitability of every project —
not just whether the company made money overall.
Without job costing, you could be winning
commercial projects and losing money on every
single one — while your residential work
subsidizes the losses. Contractor Ally has seen
this exact scenario with multiple clients.
1Code every labor hour, material cost, and subcontractor payment to the correct project code from the day the cost is incurred
2Compare actual costs against estimated costs weekly — not at project completion when it is too late to act
3Calculate gross margin per project type
quarterly to identify which work to pursue and which to price differently
Every month your bookkeeper
should deliver these reports:
Profit and Loss Statement
Shows revenue, expenses, and
net profit for the month and
year to date.
Balance Sheet
Shows assets, liabilities, and
equity position as of month end.
Cash Flow Statement
Shows actual cash in and out —
separate from P&L accrual
accounting.
AR Aging Report
Shows all outstanding invoices
by age — current, 1-30 days,
31-60 days, 60+ days.
Job Cost Summary
Shows budget vs actual for
every active project.
If you are not receiving all
five of these reports monthly,
your bookkeeping is incomplete.
The contractors who never
scramble at tax time are the
ones who treat tax preparation
as a year-round process —
not an annual event.
Starting in October every year:
Review year-to-date P&L and
estimate annual tax liability
Identify any large purchases
or equipment investments
to make before year end
Ensure all subcontractor
payments are documented for
1099 filing
Organize all receipts and
expense documentation
Deliver a complete, clean
QuickBooks file to your CPA
by January 15th
Tools we use:
QuickBooks Online · Xero
Microsoft Excel · ADP
Google Workspace
