Mastering Construction Finances: How to Build a Solid Foundation with QuickBooks Online
- Charles Stoy
- Jan 13
- 3 min read
Running a construction business is like crafting a sturdy foundation for a building—it requires precision, the right tools, and a strong structure to support growth. Setting up your Chart of Accounts in QuickBooks Online (QBO) is the first step toward organizing your financial data for clarity and decision-making.
In this guide, we’ll explore how to create a Chart of Accounts that works for your construction company, seamlessly record daily transactions, and reconcile them to maintain clean and accurate books. Whether you’re building skyscrapers or remodeling homes, these steps will help keep your finances as solid as your work.
A well-constructed Chart of Accounts is essential for tracking your income, expenses, and the flow of money within your business. For construction companies, it’s critical to reflect the unique way you operate—monitoring costs by project, handling retainage, and managing both direct and indirect expenses.
To start, navigate to Settings (Gear Icon) > Chart of Accounts in QBO. Each account you create should match the needs of your business. For example:
Assets include accounts like Cash, Accounts Receivable, Retainage Receivable, and Construction in Progress (CIP), which track funds, unpaid invoices, and ongoing project costs.
Liabilities cover accounts such as Accounts Payable, Retainage Payable, and Payroll Liabilities, ensuring you have a clear picture of what you owe.
Income is categorized by sources like Construction Income for project revenue and Change Orders Income for additional work.
Expenses include the costs of Labor, Materials and Supplies, Subcontractor Payments, and other operational necessities.
Each account acts like a tool in your financial toolbox, giving you clarity on where money is moving and ensuring you’re equipped to make informed decisions.
Once your Chart of Accounts is in place, the next step is to breathe life into it with day-to-day transactions. Recording invoices, bills, and payments accurately ensures you’re always aware of your financial position.
When invoicing clients for construction income, QBO makes it easy to track the full scope of your revenue. For example, an invoice might include one line for project revenue under Construction Income and another for retainage withheld under Retainage Receivable as a negative amount. This setup ensures that both your immediate receivables and withheld payments are accurately tracked.
On the expense side, vendor bills should be assigned to the appropriate accounts. A bill for $20,000 in framing lumber would fall under Materials and Supplies, while a subcontractor’s $15,000 invoice for electrical work would be categorized under Subcontractor Payments. By carefully assigning each expense, you can ensure that project costs are transparent and traceable.
Transactions are only one piece of the puzzle. To ensure your books remain accurate, reconciling your accounts is a crucial practice. This process matches your QBO records to your bank and credit card statements, identifying discrepancies and ensuring everything aligns.
Reconciliation is especially important for construction companies dealing with retainage and construction in progress. When reconciling accounts, tools like the Accounts Receivable Aging Summary help verify that retainage amounts withheld by clients are accurate, while the Accounts Payable Aging Summary ensures that amounts you’ve withheld from subcontractors are correctly recorded. These reports provide a double-check system, catching errors before they grow into larger issues.
Accurate records are only as useful as the insights you draw from them. With your transactions and reconciliations in place, QBO’s reporting tools allow you to analyze the financial health of your business. Reports like Profit and Loss by Project help you identify which projects drive profitability and which might need adjustments. The General Ledger for CIP ensures that all costs associated with ongoing projects are correctly allocated before being cleared to Cost of Goods Sold (COGS).
These reports are more than numbers—they’re a blueprint for strategic decisions. By reviewing them regularly, you can refine your bidding process, optimize resource allocation, and ensure each project contributes to your overall success.
A well-organized financial system doesn’t just keep your books tidy; it transforms how you run your business. From identifying unprofitable projects to ensuring timely payments, QuickBooks Online becomes a tool for building a sustainable and profitable future.
If your construction company is ready to build a stronger financial foundation, let me guide you through the process. From setting up QuickBooks Online to creating reports tailored to your projects, I can help simplify and optimize your bookkeeping. Contact me today to get started!
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