Key takeaways
What this article covers, in order:
- The chart of accounts for a construction business
- The 3 entries a construction business gets wrong
- What a construction business can claim
- The reports to run every month
- Frequently asked questions
- Where to go next
A job runs for months, you bill on progress, the client holds retention, and the only honest statement of where you stand is costs to date against costs to complete. Cash in the bank says nothing about whether a contract is making money.
This is the bookkeeping side of that problem: the accounts to set up, the entries that go wrong, and what you can claim. If you are still choosing software, the round-up linked at the end compares the options.
The chart of accounts for a construction business
Start from these rather than the default template. The codes are illustrative; the separations are what matter, because each one answers a question you will be asked later.
1250 Contract work in progress
1260 Costs in excess of billings — underbilled
1170 Retention receivable
2150 Retention payable to subcontractors
2320 Billings in excess of costs — overbilled
4000 Contract revenue
5100 Direct labour
5150 Subcontractor costs
5200 Materials
5300 Plant and equipment hireThe 3 entries a construction business gets wrong
An application for payment
Revenue follows the certified value and the stage of completion, not the application you sent. Recognising the application overstates revenue the moment it is disputed.
Retention held by the client
A receivable, not a bad debt and not a discount. Writing it off at practical completion gives away money you are owed.
Materials delivered to site but not used
Still inventory or prepaid cost, not consumed cost. Expensing on delivery makes the job look over-budget early and under-budget later.
What a construction business can claim
Deductibility follows the rule in your own jurisdiction, so this is a checklist to take to your accountant rather than an answer. For a construction business the cost lines to review first, and the record each one needs, are:
| Cost line | The record to keep |
|---|---|
| Direct labour | The invoice, and the business-use split where the cost is shared |
| Subcontractor costs | The invoice, and the business-use split where the cost is shared |
| Materials | The invoice, and the business-use split where the cost is shared |
| Plant and equipment hire | The invoice, and the business-use split where the cost is shared |
Whether each of those is deductible, and how much of it, is a rule your tax authority sets and changes. Keep the record either way; take the question to your accountant with the figures in front of you.
The reports to run every month
- Job costing with committed costs, not just invoices received — review it monthly, not at year end.
- Percentage-of-completion revenue, with over- and under-billing reported — review it monthly, not at year end.
- Retention tracked on both sides — review it monthly, not at year end.
- Progress applications and certified values, separate from invoices raised — review it monthly, not at year end.
Frequently asked questions
What is the best accounting software for construction?
There is no single best one; there is a best one for a shape of business. For a construction business, work down the criteria in the section above and stop at the first option that clears all of them — that list is short, usually two or three.
The criteria that eliminate most options fastest are: Job costing with committed costs, not just invoices received; Percentage-of-completion revenue, with over- and under-billing reported; Retention tracked on both sides.
Give me a list of accounting software for construction that offer the best security?
Ask for evidence rather than adjectives. The things worth checking, in order: an independent audit you can see (SOC 2 Type II or ISO 27001, with the report date), encryption in transit and at rest, enforced multi-factor authentication, role-based permissions fine enough that a bookkeeper cannot export your whole ledger, an immutable audit trail of who changed what, where your data is hosted and under which country's law, and a stated backup and recovery position.
Then ask the question the brochure will not answer: can you see, after the fact, who changed a figure and what it was before? For a construction business that audit trail is worth more than any single feature on the security page. A vendor who will send the audit report under NDA is telling you something; one who answers with the words "bank-grade security" is telling you something too.
Is there free accounting software for construction?
There are free tiers, and they are real — but the limit is what matters, not the price. Find the cap before you move your books: how many documents or transactions a month, how many bank accounts, how many users, and whether the free tier includes the one thing you came for. HelloBooks has a free plan; /pricing lists what it covers today.
How much does accounting software for construction cost?
Published prices move, and the figure that matters is the one including the module you actually need — inventory, payroll or multi-currency are often a tier up, so the headline price is rarely the price you pay. Price each shortlisted option at the tier that carries what you actually need, on the vendor's own page, on the day you decide.
How do I switch accounting software without losing my history?
Migrate on a period boundary and bring three things: opening trial balance, open customer and supplier balances, and your chart of accounts. Transaction history can usually stay in the old system as a read-only archive — attempting to re-import years of detail is where most migrations lose a week and a reconciliation.
Where to go next
- HelloBooks for construction
- The construction accounting software round-up
- HelloBooks in the United States
- HelloBooks pricing and what each plan includes
This guide is written for businesses in the US, UK, Canada, Australia, New Zealand and Singapore. Tax treatment differs by country — check the rule for yours before you act on it.
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