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The Best tool for keeping your finances organized is a chart of accounts in QuickBooks. As a construction company owner or contractor, managing your finances is crucial for the success of your business. This comprehensive guide will help you set up a chart of accounts tailored specifically for construction companies, streamlining your bookkeeping and enabling informed financial decisions.
How to Set Up Chart of Accounts in QuickBooks for Construction Companies
What is a Chart of Accounts?
A chart of accounts is a comprehensive list of all the accounts used to categorize your financial transactions. These accounts are typically organized into several main types:
- Assets (1000-1999)
- Liabilities (2000-2999)
- Equity (3000-3999)
- Income (4000-4999)
- Cost of Goods Sold (5000-5999)
- Expenses (6000-6999)
- Payroll Expenses (7000-7999)
- Other Income (8000-8999)
- Other Expenses (9000-9999)
A well-organized chart of accounts helps track financial activities, generate accurate reports, and make informed business decisions in the construction industry. It serves as the foundation for all your financial reporting and analysis, making it an essential tool for construction project management and overall business success.
Free Sample Download Construction Chart of Accounts

The Importance of a Tailored Chart of Accounts for Construction Companies
The construction industry has unique financial tracking needs that set it apart from other businesses. A properly structured chart of accounts for a construction company should:
- Facilitate accurate job costing
- Track progress on long-term projects
- Manage equipment and material inventory
- Handle retainage
- Account for subcontractor payments
- Manage change orders
By tailoring your chart of accounts to these specific needs, you’ll be better equipped to handle the financial complexities of the construction industry.
Steps to Set Up Your Construction Chart of Accounts in QuickBooks
1. Access the Chart of Accounts
Open QuickBooks and navigate to the “Chart of Accounts” section, usually found under the “Company” or “Accounting” menu. This is where you’ll begin customizing your accounts for your construction business.
2. Review the Default Accounts
Examine the existing accounts and identify which ones to keep, modify, or delete for your construction business. QuickBooks provides a basic set of accounts, but you’ll need to tailor these to fit the specific needs of your construction company.
3. Add Construction-Specific Accounts
Add accounts relevant to your construction business. Here’s an expanded list of accounts you might consider:
Asset Accounts (1000-1999):
- 1100 Cash and Cash Equivalents
- 1200 Accounts Receivable
- 1300 Retainage Receivable
- 1400 Job Materials Inventory
- 1500 Equipment and Machinery
- 1600 Construction in Progress
- 1700 Prepaid Expenses
- 1800 Other Current Assets
Liability Accounts (2000-2999):
- 2100 Accounts Payable
- 2200 Subcontractor Payables
- 2300 Retainage Payable
- 2400 Accrued Expenses
- 2500 Short-term Loans
- 2600 Equipment Loans
- 2700 Payroll Liabilities
- 2800 Other Current Liabilities
Equity Accounts (3000-3999):
- 3100 Owner’s Equity
- 3200 Retained Earnings
Income Accounts (4000-4999):
- 4100 Contract Revenue
- 4200 Change Order Income
- 4300 Equipment Rental Income
- 4400 Materials Resale Income
- 4500 Other Construction Income
Cost of Goods Sold (5000-5999):
- 5100 Direct Labor Costs
- 5200 Direct Materials Costs
- 5300 Subcontractor Costs
- 5400 Equipment Rental Costs
- 5500 Other Direct Project Costs
Expense Accounts (6000-6999):
- 6100 Indirect Labor
- 6200 Office Expenses
- 6300 Professional Fees
- 6400 Marketing and Advertising
- 6500 Vehicle Expenses
- 6600 Insurance
- 6700 Permits and Licenses
- 6800 Job Site Utilities
- 6900 Equipment Maintenance and Repair
4. Create Subaccounts
Use subaccounts to further organize your finances. This allows for more detailed tracking and reporting. For example:
- 1500 Equipment and Machinery
- 1510 Excavators
- 1520 Bulldozers
- 1530 Cranes
- 1540 Trucks
- 1550 Small Tools
- 4100 Contract Revenue
- 4110 Residential Projects
- 4120 Commercial Projects
- 4130 Industrial Projects
5. Set Up Job Costing
Implement job costing to track costs and revenue for each construction project. This is crucial for understanding the profitability of individual projects and making informed decisions about future bids. Here’s how to set it up:
- Create separate income and expense accounts for each project
- Use classes or locations in QuickBooks to track project-specific transactions
- Set up items to track specific materials or services for each job
- Utilize job costing reports in QuickBooks to analyze project profitability

Best Practices for Your Construction Chart of Accounts
1. Keep It Simple
While it’s important to have detailed tracking, avoid overcomplicated accounts. Stick to what’s necessary for your construction business. Too many accounts can lead to confusion and errors in bookkeeping.
2. Be Consistent
Use consistent naming conventions and numbering systems for easy navigation. This will make it easier for you and your team to find and use the correct accounts consistently.
3. Accurate Job Costing
Assign costs to specific projects for better profitability analysis. Use construction-specific software solutions for accurate tracking. This will help you understand which types of projects are most profitable and where you might need to adjust your pricing or processes.
4. Review and Update Regularly
Periodically review and update your chart of accounts as your construction business evolves. As you take on new types of projects or expand your services, you may need to add or modify accounts to accurately reflect your business activities.
5. Proper Payroll Management
Efficiently manage payroll by allocating labor costs to correct projects. Consider using industry-specific payroll services that integrate with QuickBooks to streamline this process.
6. Consult with a Professional
Work with an accountant specializing in construction accounting to ensure your chart of accounts meets industry standards and complies with relevant regulations. They can also provide valuable insights into optimizing your financial structure for tax purposes.
7. Utilize QuickBooks Features
Take advantage of QuickBooks features designed for construction companies, such as progress invoicing, change orders, and retainage tracking. These features can help you manage the unique aspects of construction finance more effectively.
8. Implement Internal Controls
Set up proper internal controls to ensure the accuracy and integrity of your financial data. This includes setting up user permissions in QuickBooks, regularly reconciling accounts, and maintaining a clear audit trail for all transactions.

Benefits of a Well-Structured Construction Chart of Accounts
A properly set up chart of accounts for your construction company offers several benefits:
- Accurate financial reporting: Get a clear picture of your company’s financial health at any time.
- Easier tax preparation: Well-organized accounts streamline the process of preparing tax returns and other financial reports.
- Better job costing and project profitability analysis: Understand which projects are most profitable and why.
- Improved cash flow management: Track incoming and outgoing funds more effectively to maintain healthy cash flow.
- Easier identification of areas for cost-cutting or improvement: Pinpoint areas where expenses can be reduced or processes improved.
- More informed decision-making: Use detailed financial data to make strategic decisions about your construction business.
- Enhanced bid accuracy: Use historical data from your chart of accounts to create more accurate bids for future projects.
- Better financial planning: Use the detailed information in your chart of accounts to create more accurate budgets and financial forecasts.
Common Challenges and How to Overcome Them
Setting up and maintaining a chart of accounts for a construction company can present some challenges. Here are some common issues and how to address them:
1. Complexity of Project Tracking
Challenge: Construction projects often have multiple phases and subcontractors, making it difficult to track costs accurately.
Solution: Use QuickBooks’ class and location tracking features in combination with your chart of accounts to break down projects into manageable segments.
2. Handling Change Orders
Challenge: Change orders can complicate project finances and throw off initial budgets.
Solution: Create specific accounts or sub-accounts to track change order income and expenses separately from the original contract.
3. Managing Retainage
Challenge: Retainage can complicate cash flow and accounting.
Solution: Set up separate asset and liability accounts to track retainage receivable and payable, ensuring these amounts are properly reflected in your financial statements.
4. Seasonal Fluctuations
Challenge: Many construction businesses experience seasonal fluctuations in income and expenses.
Solution: Use your chart of accounts in conjunction with QuickBooks’ reporting features to track and analyze seasonal trends, helping you better prepare for slow periods.
Conclusion
Setting up a chart of accounts in QuickBooks tailored to your construction company is crucial for effective financial management. By following this guide and implementing best practices, you’ll create a solid foundation for your company’s financial success.
Remember, your construction chart of accounts should grow with your business. Regular reviews and updates will ensure it continues to serve your needs as your construction company evolves. Start with a template designed for construction companies, maintain consistency, and consult with professionals when needed to keep your chart of accounts relevant and supportive as your business expands.
With a well-structured chart of accounts, you’ll have the financial insights needed to make informed decisions, improve profitability, and drive your construction business forward. Take the time to set it up correctly, and you’ll reap the benefits for years to come.
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