Construction and Contractors

Key Areas Where an Accountant Can Help a Contractor / Construction Business

1. Job Costing & Project Accounting

   • Track costs (labor, materials, equipment, subcontractors, overhead) on a per-job basis, so you know actual profitability by project.

   • Set up systems (or tailor existing accounting software) to allocate indirect costs and overhead to jobs fairly.

   • Help you with change orders, tracking them as separate line items (so you don’t absorb cost overruns).

   • Monitor cost to complete estimates, and compare “estimated vs actuals” as the job progresses.

2. Work-in-Progress (WIP) / Revenue Recognition & Reporting

   • Prepare WIP schedules to correctly account for partially completed jobs (especially when using percentage-of-completion accounting).

   • Handle timing issues of when revenue and costs should be recognized (especially under accrual accounting).

   • Prepare periodic WIP “rollforwards” to reflect progress, retention, billings, and cost accruals.

3. Cash Flow Management

   • Forecast cash inflows and outflows considering the lumpy nature of construction payments (retentions, progress draws, delays).

   • Help negotiate or monitor lines of credit or short-term financing to cover “holes” in cash cycles.

   • Advise on when to call for progress draws or change orders to ensure positive cash flow throughout the project.

4. Retainage / Retention Tracking

   • Track amounts being withheld (retention) by clients, when they become due, and when you can expect to collect them.

   • Monitor for unclaimed retention and advise on strategies to ensure you receive your retainage on time.

5. Subcontractor Management & 1099 / Compliance

   • Ensure that subcontractors are properly classified (employee vs 1099) in accordance with IRS rules and Washington State / local laws.

   • Prepare and file 1099s or equivalent reports accurately for payments to subs.

   • Assist with compliance if there is prevailing wage, certified payroll, union rules, or local municipality rules (some public contracts require certified payroll reporting).

6. Payroll & Labor Compliance

   • Manage payroll processing, garnishments, payroll tax filings, and ensure labor laws compliance (overtime, prevailing wage, state rules).

   • For public or government contracts, help with certified payrolls, prevailing wage, or Davis-Bacon compliance (where applicable).

   • Aid with contractor / owner audits around payroll.

7. Sales & Use Tax, Construction Permits, Excise Tax Compliance

   • In Washington, make sure you handle state sales & use tax correctly (materials, subcontractor purchases, resale certificates).

   • Handle local construction permit fees, business licenses, and other district-level taxes (city, county).

   • Assist with obtaining and maintaining licenses (contractor’s license, local business license) and ensure you meet compliance deadlines.

8. Bonding, Lending & Financial Presentations

   • Prepare financial statements in a “bankable” format so you can qualify for lines of credit or bonding.

   • Help prepare pro forma financial projections to back loan or bonding applications.

   • Advise on required financial ratios, lender covenants, and debt structure.

9. Tax Planning & Optimization (Federal, State, Local)

   • Identify construction-specific deductions and credits (e.g. equipment depreciation, bonus depreciation, like-kind exchanges, section 179, etc.).

   • Advise on optimal business structure (e.g. S corp, C corp, LLC, partnership) for your tax situation and growth path.

   • Provide quarterly tax estimates to avoid underpayment penalties.

   • Assist with state / local tax law changes in Washington, e.g. Washington’s business & occupation tax (B&O tax) rules, excise taxes, and how they apply to construction.

   • Optimize mix of personal vs business expenses, home-office allocations, travel, vehicle use, etc.

10. Budgeting & Forecasting

• Help you plan budgets for each job, and forecast profitability under different scenarios (material cost inflation, labor rate increases).

• Provide rolling forecast updates with actuals vs budget comparisons.

• Assist in strategic planning — deciding which types of jobs or clients are more profitable, when to expand, etc.

11. Internal Controls & Process Design

• Design internal systems to prevent fraud, double-payments, or misuse (e.g. voucher approvals, segregation of duties, purchase order control).

• Recommend workflows and checks (e.g. matching invoices, change orders, lien waivers).

• Help with digital document management, cloud systems, and integration between job management software and accounting.

12. Audit, Assurance & Dispute Support

• If there is a dispute (e.g. contract claim) or audit, the accountant can assist with forensic review of job costs, change orders, supporting documentation.

• Provide support for audits (e.g. by bonding company or municipality).

• Provide agreed-upon procedures, reviews, or audits as required by clients, lenders, or regulatory bodies.

13. Business Structure, Succession & Exit Planning

• Assist in succession planning—how to hand off the business eventually, or sell it.

• Valuation work—what is your construction business worth, considering backlog, assets, goodwill.

• Assist with mergers, acquisitions, or joint ventures in construction projects.

14. Special Local / Regional Advice

• Keep you up to date with specific Washington State or municipal rules affecting contractors (licensing, prevailing wage, sales tax, local compliance).

• Advice on how Seattle/Bellevue permit / inspection fees or local assessments (e.g. transportation impact fees) might affect your quoting and cost structure.

• Understand local labor market wages, prevailing wages (for public projects), union rules in the Seattle region.