What a Construction Accountant Does (and How It Saves You Money)

You may be asking yourself:

How does a specialist construction accountant differ from a generalist accountant?

And do I actually need one?

In this article, we’ll answer those questions so you can decide for yourself.

Specialist construction accountant vs generalist accountant

There are areas of construction accounting that general accountants do not come across very often.

That means things can be missed or done incorrectly.

There are also areas where a specialist construction accountant can add real value and help increase the profit of a construction business.

This goes far beyond basic bookkeeping.

Job costing

With a generalist accountant, year end accounts are often prepared months after the year end.

By that point, your projects/jobs that were in progress at the year end may already be complete.

And little or no job costing has been tracked in real time.

With a specialist construction accountant, income and costs are allocated to specific jobs or ‘projects’ in your bookkeeping software.

That means you can see, in real time, how much profit or loss each project is making.

Reports can then be produced to show which jobs are performing well.

And which ones are not worth repeating.

Those insights can make a big difference to the profitability of your business.

Management accounts

This links closely to job costing.

Many specialist construction accountants offer monthly management accounts.

This helps you see your profit position in real time each month.

It also gives you visibility over your corporation tax liability months before it becomes due.

Construction management accounts can be more complex than standard accounts.

You may have incomplete jobs, retentions, CIS deductions and payrolls where some staff are paid weekly, some monthly.

A specialist construction accountant deals with these issues regularly and knows how to handle them properly.

If you receive management accounts but are not sure what to look for, I’ve written a guide on how to interpret and use your management accounts.

With a generalist accountant, construction may only make up a small part of their client base.

That can create more room for error.

Read more about our construction management accounts service.

VAT treatment

Construction has specific VAT rules that need to be handled correctly.

Some example of these are:

The VAT domestic reverse charge.

Zero rated work on new build properties.

Reduced rate work in some cases.

If VAT is treated incorrectly, the cost can build up quickly.

Especially if the same mistakes have been repeated over a long period.

Once corrected, this can lead to unexpected VAT liabilities, plus interest and penalties from HMRC.

Read more about our VAT returns service.

CIS compliance

CIS is another area where specialist knowledge matters.

A good understanding is needed to make sure nothing is missed.

If you are a contractor, CIS must be deducted from subcontractor payments and paid over to HMRC.

If this is missed, it can lead to penalties and interest.

If you are a subcontractor working for larger firms, CIS may be deducted from your income.

That deduction then needs to be recorded properly so it can be reclaimed.

Depending on the setup, it may be offset against PAYE liabilities during the year.

Or against your corporation tax bill once the year end accounts are prepared.

This is an area that can be easily overlooked if accounts are only prepared after the year end and there is limited understanding of CIS suffered.

Read more about our CIS services.

Getting answers quickly

When you speak to a specialist construction accountant, there is a good chance they will know the answer to your query straight away.

They deal with these issues every day.

That gives you more confidence that the advice is based on real experience, not a quick internet search.

A generalist accountant may still be able to help.

But construction specific queries may take longer to deal with if they do not come up often in their client base.

Also, because specialist firms tend to charge more than low cost generalist firms, the specialist firm can often spend more time per client and provide a more responsive service.

Lower cost firms usually need a higher volume of clients to make the numbers work.

That often means less time allocated to each one.

Tax planning

This is not unique to construction.

But it is an area where a proactive accountant can add a lot of value.

At Construction One Accountants, we hold a tax planning call with each client around two months before their year end.

The aim is to identify any legitimate ways to reduce tax before the year closes.

Topics may include:

Year end dividend planning to reduce personal tax.

Pension contributions to reduce corporation tax.

Claiming smaller costs that are often missed, such as working from home allowance, mileage, or business expenses paid personally.

Timing of asset purchases.

Share structure.

Director’s loan account planning.

Planning ahead for the next 12 months, including growth, succession, or exit plans.

This level of service is less likely to be included with a lower cost, compliance only package.

Of course, specialist advice is not right for every business.

If your turnover is still low, a cheaper generalist accountant may be perfectly suitable for now.

Read more about our tax planning service.

So, how can a specialist construction accountant save you money?

Fewer errors.

A specialist is more likely to understand construction specific VAT and CIS rules, which reduces the risk of costly mistakes, interest, and penalties.

Better visibility.

With accurate job costing and management information, you can see which jobs are actually making money. That helps you price better and focus on the right work.

Faster CIS reclaims.

Clean records and accurate submissions help avoid delays.

Less admin for you.

You have someone to go to with construction specific questions, which frees up your time to focus on running the business (or spending more time with your family!).

Better tax planning.

Your year end should not come as a shock.

With proper planning, you can make decisions in advance around dividends, bonuses, pension contributions, and capital purchases, reducing your tax liability.

What are the downsides?

As mentioned previously - a specialist construction accountant will usually charge more than a small generalist firm.

But often the gap is not as large as people expect.

And for many businesses, the extra value more than pays for itself.

If you’d like to see what that looks like in practice, get in touch for a free quote.