4 Proven Accounting Tips Construction Managers Can Use To Streamline Financial Operations

This article was paid for by Intuit QuickBooks.

If you’re committed to overcoming cash flow constraints, you may want to take a tip from your contractor. Cash flow issues are a major problem in construction, an industry known for tight margins and long payment timelines.

“Sometimes an invoice will fall right before the end of the year, and that customer will say, ‘We’re not going to pay you until January,’ just so they look more profitable on their end-of-year accounts,” said electrician Dylan Pierce, co-founder of Fifty Five Electric in Boise, Idaho. 

It’s not unusual for it to take 60 to 90 days before you receive a payout from a project, Pierce adds. That unpredictability can push any small business to its limits. 

So, how can construction companies keep financial uncertainty to a minimum? Here are four strategies:

Construction companies operate under extremely tight margins and must anticipate direct and indirect costs for every project. Many are just a few inaccurate estimates away from a major financial downturn. 

Time spent on the job is both the biggest expense and the hardest to accurately gauge, leaving firms to choose between surprising clients with a larger bill or absorbing the additional cost. QuickBooks integrates with construction management software tools like Procore and Buildertrend to improve job-cost forecasting.

If you have a bigger budget, Intuit Enterprise Suite added AI insights and digital proposals for even more speed and accuracy.

The best accounting software delivers data-driven financial reports to help you stay organized and on track for business growth. During a project, a work-in-progress (WIP) report provides an overview of how ongoing costs (like labor and materials) are stacking up against progress payments, so you can prevent expenses from outstripping revenue.

When paired with QuickBooks Time, a WIP report lets you compare your initial estimate with your team’s actual hours on-site.

Here are two other reports that can help track cash flow:

Like many businesses, construction is all about relationships — with workers, with subcontractors and with clients. 

“When you have a good relationship with a general contractor on a project, it’s much easier to ask for money upfront that you otherwise might have to wait months for,” Pierce said. “Instead, you can say, ‘OK, to start this project, I need 20% upfront.’ That allows you to start paying for materials before the prices change.”

Every sector in the construction industry has different standards for deposits and invoicing. To figure out the norms in your corner of the business, keep tabs on the industry publication Construction Dive and the Associated General Contractors of America, a leading trade association since 1918.

Construction management is full of surprises. The better prepared you are for unexpected cash drains, the better you’ll be at overcoming them. 

“Each year has a few three-payroll months,” Pierce said. “That’s a 50% increase in payroll expenses, which can get you if you’re not paying attention.”

Set aside time to research potential pitfalls, such as cost overruns and rising tariffs. You can’t anticipate every disaster, but getting ahead of just one or two can make all the difference.

When possible, put extra earnings into an emergency fund and resist the temptation to use high-interest buy now, pay later services, even for necessary purchases.

Seek out less costly options and make your current holdings work harder for you. QuickBooks Checking offers a competitive annual percentage yield on funds that you can delegate to specific sub-accounts, or “envelopes.”

Try to delay big-ticket items until you have your savings built up.

“Don’t hurt yourself,” said Pierce. “If you have to, push that purchase back a month or two to get to that target.”