Profit is earned over time, not on invoice
Billing follows a payment schedule or a valuation. Neither is the same as the profit actually earned in the period, and treating them as the same produces accounts that mislead in both directions.
Construction and projects
Projects are costed.
Not just invoiced.
Construction breaks ordinary bookkeeping, because the entity-level accounts can look perfectly healthy while an individual contract quietly loses money. The truth lives at project level.
The problem
Why standard books
do not work here.
A general ledger designed for a trading business answers the wrong question for a contractor.
Cost is committed long before it is incurred
An order placed with a subcontractor is a real obligation that appears nowhere in a conventional ledger until the invoice arrives — by which point the decision it should have informed is months past.
The entity view hides the project view
Three projects running: one well ahead, two bleeding. Consolidated, it looks like an ordinary month. By the time it shows at entity level, the recoverable position is gone.
Retentions distort everything
Amounts certified but not payable for a year sit in receivables, flatter the balance sheet and obscure actual cash. They need to be tracked and aged separately.
Variations outrun the paperwork
Work gets instructed on site and priced later, or never. Unpriced variations are the most common single cause of a project that was profitable on paper and was not in the end.
Funders want project-level evidence
A drawdown request is not a request for your management accounts. It is a request for cost incurred, certified and supported on that specific project.
Project costing
Cost that tells you
something while
you can still act.
The point of project costing is not reporting history. It is knowing where a contract is going while there is still time to change the outcome.
01
A cost structure that matches how you build
A work breakdown and cost coding that reflects the actual trades and phases — not a chart of accounts borrowed from a retailer. Everything downstream depends on getting this right at the start.
02
Committed, incurred and certified tracked separately
Three different numbers that are routinely conflated. Orders placed, costs actually incurred, and work certified by the professional team. You need all three to know where you stand.
03
Cost to complete, maintained
The forecast final cost, revisited every month against what remains. A contract in trouble shows up here long before it shows up in the ledger, and that gap is the entire value of the exercise.
04
Variations and claims tracked from instruction
Recorded when instructed, not when priced and certainly not when finally agreed. Distinguishing instructed, priced, submitted and certified is what stops the end-of-contract argument.
05
Retentions aged and recovered
Held on your contracts and held by you on subcontractors. Tracked by release date and actively chased — retention is simply forgotten money.
06
Preliminaries and overhead recovered properly
Site establishment, plant, supervision and the general costs. Allocated across contracts on a defensible basis so individual project margins mean something.
07
Subcontractor accounts reconciled
Payment certificates against orders, measured against work done, with retention and contra charges applied. Subcontractor accounts are where disputes start and where unrecorded liability hides.
Drawdowns
Funding requests
that get approved
first time.
Where a build is bank-funded, the drawdown cycle is the business’s cash flow. A request that comes back for more information costs weeks.
- Cost schedules supporting each draw, reconciled to the ledger and to the underlying invoices
- Reconciliation of cumulative amounts drawn against cumulative cost actually incurred, so the funding position is never a surprise
- Supporting documentation assembled to match what the quantity surveyor and the funder will ask for, in the form they ask for it
- Retention and contra charges reflected correctly rather than argued about after certification
- A standing file that makes the next drawdown faster than the last
Reporting standards
Revenue recognition,
done currently.
This is where a lot of construction accounting is quietly out of date.
If your accountant still refers to IAS 11, that standard was withdrawn.
Construction revenue is recognised under ASC 606 Revenue from Contracts with Customers in the United States, and under IFRS 15 — or Section 23 of IFRS for SMEs — almost everywhere else. FASB and the IASB wrote the two together and the five-step model is the same in both, which is exactly why this work travels across borders.
Over time, or at a point in time
Neither standard assumes percentage of completion. Recognising revenue over time requires the criteria to be met, and that has to be answered contract by contract rather than set as a house policy.
Measuring progress defensibly
Where revenue is recognised over time, progress has to be measured on a basis you can support — commonly a cost-based input method, which only works if the underlying cost records are accurate.
Contract assets and contract liabilities
Work done but not yet billed, and amounts billed ahead of work done. These are distinct from trade receivables and deferred income, and getting the presentation wrong is one of the most common review findings.
Onerous contracts recognised when known
A contract forecast to lose money is dealt with when that becomes apparent, not when it finally completes. This is exactly what a maintained cost-to-complete gives you.
Experience
Construction cost
records, in detail.
Recent work has included a full reconstruction and review of the cost records for a multi-million-rand residential build — several hundred cost register lines agreed item by item to the underlying invoices, delivery notes and proofs of payment, reconciled to the rand, with a written queries schedule for the items that could not be substantiated.
That is the level the work is done at. It is also, deliberately, not an audit and carries no assurance — a distinction that is stated in writing on every engagement of this kind.
Next step
Know where the project is
while you can still act.
The question worth asking first
Am I a CPA? No.
Here is what I am.
You should know exactly what you are hiring and exactly what you are not. Nobody comes off well when that surfaces later.
A regulated professional accountant
AGA(SA) — Associate General Accountant — is awarded and regulated by SAICA, the South African Institute of Chartered Accountants, the same body that awards CA(SA). It carries a binding code of professional conduct, mandatory continuing education and a disciplinary process.
It is not a United States credential and I will never imply that it is. I am not a CPA, I am not an Enrolled Agent, and I hold no state licence.
Why that does not matter for this work
Client accounting and advisory work — the books, the month-end close, the controls, the management reporting and the systems underneath them — requires no CPA licence anywhere in the United States. It requires an accountant who does it properly every month and is still across the detail in November.
What does require a licence is tax and attest work. That is precisely what stays with your CPA.
The person who keeps the books should not be the person who assures them. An accountant willing to do both for the same client is telling you something.
Your CPA keeps the tax. I do not prepare or sign US federal or state returns and I cannot represent you before the IRS. I produce the records, reconciliations and reporting your CPA works from — which generally makes their job faster and their advice better founded. South African taxpayers: SARS compliance I handle directly — the South African offering is set out here.