Running a successful construction business comes with aspects that you love but it can also be painful, especially if you are not a numbers person. Construction accounting brings unique challenges compared to other industries; however, it does not have to be a headache. It will require diligence, attention to detail and some accounting experience. If you choose to take this task on, here are five key points for good bookkeeping practices in the construction industry.

#1: Progress Billing

Allows contractors to bill at different intervals, and payments are based on percentage of project completion. This method of billing helps with cash flow problems and is an initiative for the contractor to complete the project swiftly, as payment will be received when the next milestone is reached. By setting up construction estimates for contracts and using those estimates to progress invoice your customers, you can ensure that nothing will be forgotten while maintaining an adequate level of funding throughout the duration of the project.

#2: Contracts & Record Retention 

  • AIA Contract Documents – standardized legal forms and contracts that define the terms for construction projects. Proper construction invoicing utilizes AIA forms and releases to ensure your submitted billing will always be approved.
  • Lien Releases – confirm that all necessary Lien Releases are received from subcontractors and suppliers, as this will ensure that payment has been effectuated and the lien has been discharged. All legal responsibilities have been completed, therefore legally protecting both parties.
  • Tax Documents – ensure tax documents and proof of insurance from vendors are in place before project begins. This will be helpful in the long run and keep you protected during and after the construction project.
  • Record Keeping – not only is record keeping a good business practice, but maintaining all documents related to contracts costs is a protection against liability. This will allow your company to defend itself against claims or be in a position to administer claims. Be sure to keep all subcontractors agreements on file and have them easily accessible, as referring back to them frequently during a project is not uncommon. A good rule of thumb is to keep documentation for at least 7 years, in the event that you company gets audited by the IRS.

#3: Reports and Estimates

  • WIP (Work in Progress)schedule/report – gives you an arial view of the project by allowing you to see the percentage of completion at any given moment, and a consolidated WIP can show you where all your current projects stand on a monthly basis. This accounting method is a key element used to identify accurate profitability for your construction project. Additionally, this gives financial stakeholders that are invested in your project a reliable financial performance of your company.
  • Estimates – keep thorough and updated estimated contract costs for each job. The estimated cost to complete is important to making sure your job remains profitable and the revenue is recognized correctly.

#4: Job Costing

Vital accounting practice used to calculate the actual costs of working on a construction project, allowing you to take the overall project and break it down into more specific tasks. Implementing a coding system is recommended in order to keep items organized. Having this in place will allow you to create budgets and predict margins. Job costing is essential to your bottom line, and the ability to accurately and effectively estimate your job costs on any project can truly make the difference for running a successful construction company.

  • Overall – this would include but not be limited to subcontractors, materials, insurance, vehicle, equipment costs. All items need to be properly allocated to the correct job. Remember to also include overhead items such as taxes, rent, workers comp insurance, etc.
  • Employees – calculating the actual cost of an employee working on a construction project is critical. Determining an accurate and detailed estimate from everyone on your team is important to keeping your business profitable, as this can be a large percentage of your costs. Running these reports regularly can allow you to have a finger on the pulse on your project, and help you identify what is too high and if/where adjustments can be made.

#5: Payroll

  • Payroll Set Up – Maintain payroll compliance with multiple jurisdictions. Capture time effectively and accurately to avoid costly errors.
  • Certified Payroll – specialized payroll required for government or military projects.

As you can see, some details that go into construction accounting are complex and different than other businesses. Accounting industry specific experts rely on different methodologies to track direct and indirect costs associated with your business. They will help outline and minimize expenses while ensuring maximization of your bottom line, as well as company growth and success.

However, if you choose to do this in-house, be sure that you consider the above key elements, among others. Properly taking these essential factors into account will allow you to have sound accounting practices and minimize the risk of costly mistakes.

Ellen J. Noble
Peer House, LLC
Staff Accountant
Construction Accountant Specialist

Everyone wants the work they do to result in a better future. Businesses want to increase profits. Researchers want to discover technological breakthroughs. Nonprofits want to solve problems. Your better future may look very different from mine, but we both see the potential for improvement over where we are now. It’s not hard to imagine a better future. The real puzzle is figuring out how to get there.

About CASA and Who We Serve

CASA of Lexington, a nonprofit that advocates for abused and neglected children, has a particularly amazing vision for the future: A world where every child gets to grow up in a safe, permanent, loving home. It’s a simple dream, but we are unfortunately a long way from realizing it.  In the past two years alone, more than 2,500 children in CASA of Lexington’s four-county service area have suffered abuse or neglect. Those children have likely suffered trauma due to how their caretakers have treated them. Many also suffered trauma when they were removed from their homes. Now, many live in foster care, residential treatment, or with relatives. They may not be sure if anyone really loves them or cares about them. Their worlds are filled with uncertainty, worry, fear, and constantly changing faces. Without someone looking out for their best interests, they may also be missing out on therapy to address their trauma or falling behind in school.

The Hard Reality 

Kentucky has been the worst state in the nation for child abuse and neglect for three years in a row. It will be difficult to get from where we are to where we want to be. For every 1,000 children, there were more than 20 cases of abuse or neglect in 2020. The national average was just under 9 cases per 1,000 children.  That means children are more than twice as likely to be abused or neglected in Kentucky than they are in the nation as a whole. It’s a hard reality to face. And there is no easy solution. But CASA of Lexington does have a small piece of the puzzle figured out.

Volunteers Making Connections

Our volunteers are doing their part to change things for the better, one case at a time. Court-Appointed Special Advocate (CASA) volunteers are trained community members who are assigned by a judge to children who have been abused or neglected. CASA volunteers visit the children regularly, becoming a consistent presence in their sometimes wildly inconsistent lives. They get to know the children on their case personally and invest time in them like no one else can. They interview adults involved in the children’s lives and have a court order giving them access to all of the children’s records, including medical and school records. Before every hearing in a child’s case, the CASA volunteer writes a report for the judge that summarizes what’s going on in the child’s life, what services they need, and what actions could speed up permanency. Those reports better inform the judge’s decisions, changing the trajectory of the child’s future.

One of our CASA volunteers discovered a little girl was in need of glasses when no one else had been able to spend the time to figure that out. The girl was headed into remedial reading classes, but soon after receiving glasses as the CASA volunteer recommended, she was moved into the advanced reading group.  Another pair of CASA volunteers — a couple who work cases together — helped the parents of the children on their case find real help for their substance misuse problems. They also connected them with a church community and helped them reach a place where they could be reunited with their children. CASA of Lexington volunteers work hundreds of cases like these each year. In 2020, our CASA volunteers advocated for 583 children. It’s a small fraction of the total children in need, but each child we help is a step on the path to our better future.

The Results

The children we help are more likely to succeed in school and far less likely to re-enter the foster care system after finding a permanent home. They are less likely to be moved around during their cases and their cases close five and a half months sooner on average. Children today become adults tomorrow. The quality of their childhood determines a lot about the quality of their adulthood. By meeting some of our neediest children where they are and helping improve their lives, CASA volunteers are making better futures possible for all kinds of future adults. Their impact can last for generations.

Get Involved

You can be a part of our better future. You can support CASA of Lexington financially by donating online at or calling (859) 246-4313. You can learn more about becoming a CASA volunteer at or by emailing And you can help raise awareness by telling other people about CASA’s vision for a better future.

Ben Kleppinger 
Community Engagement Coordinator
CASA of Lexington
CASA volunteer