If you run a construction business, you already know how important it is to understand where your money is coming from and where it is going. You might have great project managers, solid crews, and steady work lined up, but if your chart of accounts is unclear or too generic, your financial reports will never tell you the full story. A good chart of accounts becomes the foundation for job costing, budgeting, WIP reporting, and cash flow forecasting. In other words, it is the structure behind every smart financial decision you make.
The good news is that you do not need anything overly complicated. You just need a clean, organized system like a construction chart of accounts that reflects the work you actually do. Think of it like organizing your tools. If everything has a place, you can find what you need quickly and catch issues before they become problems.
Start With A Clear Structure
Every chart of accounts begins with the same basic framework:
- Assets
- Liabilities
- Equity
- Revenue
- Cost of Goods Sold
- Overhead
What makes construction different is the level of detail inside those categories. Since you manage crews, project timelines, change orders, retainage, and materials, your accounts need to support the way real jobs run.
Your chart of accounts should mirror the way you estimate jobs and track them in the field. When your cost codes and accounts line up, every report becomes easier to understand. That consistency helps you measure performance accurately and gives you better insight into where margins are slipping.
Asset Accounts
Construction companies often hold more equipment, retainage, and materials inventory than other small businesses, so asset accounts play a big role in understanding your financial health. You want to be able to see at a glance how much cash you have available, what customers still owe you, and how much of that money is tied up in retainage or unbilled work.
Your asset accounts usually include:
- Cash and operating accounts
- Accounts receivable
- Retainage receivable
- Inventory or materials stock
- Prepaid expenses
- Work in progress, if your system tracks underbilling and overbilling
- Fixed assets such as vehicles, trailers, heavy equipment, tools, leasehold improvements
- Accumulated depreciation
These accounts help you evaluate liquidity as well as how efficiently your equipment is being used. Lenders and bonding partners also pay close attention to these balances, so getting them right gives you a stronger position during reviews.
Liability Accounts
Liabilities show what you owe to vendors, lenders, and the government. In construction, these numbers can move quickly, especially if you manage multiple projects at once or have long payment cycles. Clear liability accounts make it easier to stay on top of bills, payroll taxes, retainage you owe subcontractors, and any short term debt you are carrying.
Common liability accounts include:
- Accounts payable
- Credit cards
- Line of credit
- Retainage payable
- Payroll liabilities and taxes
- Sales tax payable
- Accrued expenses
- Equipment loans
- Vehicle notes
When these accounts are tidy and up to date, you get a much better sense of your true cash position, which helps you plan ahead instead of reacting to surprises.
Equity Accounts
Equity accounts do not need much complexity. Equity simply reflects the portion of the business that belongs to the owner after assets and liabilities are taken into account.
Most small construction companies keep this section straightforward with owner capital, owner draws, and retained earnings. Keeping your equity clean helps you understand the true value of the business over time and makes year end reporting easier.
Revenue Accounts
Instead of lumping all earnings into one generic revenue account, break your income into meaningful categories. This could include contract revenue, change orders, and service work.
Some companies also separate revenue by project type, especially if margins vary between service jobs, remodels, tenant improvements, or ground up builds.
A little bit of separation helps you see which types of work are giving you steady profit and which ones may need better pricing or tighter project management.
Cost Of Goods Sold
Your cost of goods sold (COGS) accounts are the heart of construction accounting. These accounts should reflect the real direct costs on your projects. Direct labor, materials, subcontractors, equipment rental, fuel, small tools, permits, and trucking are common categories. If you already track costs by trade or crew, your chart of accounts should support that structure so your job costing remains consistent.
The goal is to get enough detail to understand where projects are winning or losing money without creating so many categories that your team struggles to code expenses correctly. A good COGS setup makes your WIP reports stronger, your forecasting more accurate, and your margin analysis more reliable.
Overhead Accounts
Overhead includes everything you need to run the business but cannot tie to a single job. Office salaries, rent, insurance, software, utilities, marketing, and professional fees all fall in this category. As companies grow, overhead tends to creep upward, so keeping these categories organized helps you spot trends early.
A clean overhead structure makes it easier to calculate your breakeven point and helps you understand whether your margins can support growth. It also helps you decide when it is time to adjust pricing or streamline administrative spending.
How Much Detail Do You Really Need
It is easy to get carried away with dozens of accounts because construction has so many moving parts. But too much detail can overwhelm your team and slow down your month end process. A good rule is to match the level of detail in your chart of accounts with the level of detail you use in the field.
If your crews report time by trade or cost code, build your accounts around that. If your estimator uses 10 major cost categories, let your accounting structure follow that same pattern. The more your chart of accounts reflects your real workflow, the easier it is for your team to code costs correctly and produce cleaner reports.
Sample Chart Of Accounts Layout
Here is an example of how a simple construction chart of accounts might look. You can use this as a starting point and adjust it to fit the way your business actually operates.
Assets: 1000 – 1999
Cash
Accounts receivable
Retainage receivable
Inventory or materials stock
Prepaid expenses
Work in progress
Vehicles and equipment
Accumulated depreciation
Liabilities: 2000 – 2999
Accounts payable
Credit cards
Payroll liabilities
Sales tax payable
Equipment loans
Retainage payable
Accrued expenses
Equity: 3000 – 3999
Owner capital
Owner draw
Retained earnings
Revenue: 4000 – 4999
Contract revenue
Change order revenue
Service and maintenance revenue
Other income
Cost Of Goods Sold: 5000 – 5999
Direct labor
Payroll taxes for field labor
Materials
Subcontractors
Equipment rental
Fuel
Small tools
Permits and inspections
Waste disposal
Overhead Expenses: 6000 – 7999
Office salaries
Rent
Insurance
Software
Utilities
Marketing
Professional fees
Training
Depreciation
Interest expense
To make this easier for contractors to implement, we are including a free downloadable Google Sheets version of this sample chart of accounts. You can copy it, customize it, and adapt it to your own estimating and job costing process.
Build A Chart Of Accounts That Supports Your Growth
When your chart of accounts is built correctly, it becomes a practical tool that helps you track job performance, manage cash flow, and understand your true margins. It gives you the clarity you need to make better decisions all year long, not just at tax time.
If you want help refining your chart of accounts or connecting it properly to your job costing and WIP reporting, our team at Abacus Professional Accountants is here to support you.
We work with construction companies every day to clean up their systems, strengthen their reporting, and give them financial insight they can rely on.
Reach out anytime and we will walk you through the next steps at a pace that feels comfortable for your business.
