Running a construction business is tough. Between managing projects, handling subcontractors, and keeping clients happy, it’s easy to assume your accounts are being handled if the VAT returns are filed, CIS returns are submitted, and year-end accounts are signed off.
But here’s the truth: those things only tick the compliance box. They don’t tell you how your business is really performing.
I recently spoke with a potential client who thought they were doing well on paper. Their accounts showed a gross profit margin of 33% on average.
Month to month, the numbers swung wildly, but overall it averaged out at 33%.
They looked at me and said:
“That can’t be right. It’s far too high.”
And they were right.
The Hidden Problem: Misallocated Expenses
When we dug into their accounts, it didn’t take long to find the issue. Expenses had been misallocated, which meant the reported margins were completely unreliable.
This is the classic case of:
“Crap in, crap out.”
If the data being entered into your accounting system is wrong, then the reports you rely on to make business decisions will be wrong too.
And if the data is wrong, how can you possibly:
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Know where your construction business actually stands?
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Plan where you want the business to go?
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Track whether you’re moving in the right direction?
Why This Matters for Construction Businesses
Margins in construction are often tight, and decisions are made daily that affect cash flow and profitability. Without accurate, up-to-date financial information, you’re essentially driving blind.
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You might think a project is profitable when it isn’t.
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You could overpay subcontractors because CIS isn’t tracked properly.
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You may be pricing jobs based on faulty assumptions.
The risk? Running out of cash, stalling growth, or even worse—losing the business.
The Four Steps to Getting It Right
Fixing this problem isn’t complicated, but it does require discipline and the right systems in place. Here’s the framework I use with construction clients:
1. Fix the Systems and Processes Going In
Get your bookkeeping right. Make sure expenses are coded properly, payroll is aligned with projects, and CIS is reconciled. The quality of your reporting depends on this first step.
2. Understand Where You Really Are
Once your data is reliable, you can get a clear picture of your margins, overheads, and cash flow. This is your baseline.
3. Build the Plan
With clarity, you can set targets—whether that’s improving margins, reducing costs, or scaling into bigger projects.
4. Track Monthly
Review performance against your plan every month. This keeps you accountable and ensures you’re making course corrections along the way.
Turning Numbers Into a Tool for Growth
Your accounts shouldn’t just be a compliance exercise. They should be a strategic tool that helps you grow, scale, and make confident business decisions.
Construction is unpredictable enough – you don’t need your accounts adding to the uncertainty. Get the inputs right, and you’ll get the clarity you need to build the business you want.
