If you run a construction business, knowing exactly how your company is performing month-to-month is crucial. While annual accounts give you a historical snapshot, monthly management accounts provide real-time insights—allowing you to make informed decisions, identify problems early, and grow profitably.
In this blog, we’ll explain exactly what your construction management accounts should include, and how to prepare them clearly and accurately.
📊 What Are Management Accounts?
Management accounts are monthly (or quarterly) financial reports designed specifically for internal business use. Unlike statutory accounts (which HMRC and Companies House require annually), management accounts are purely for your benefit.
They typically include:
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Profit & Loss (P&L)
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Balance Sheet
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Cash Flow Forecasts
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Project-level financial analysis
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Key Performance Indicators (KPIs)
🏗️ Why Construction Companies Need Management Accounts
Construction is complex, with slim margins, tight cash flow, and frequent project overruns. Good management accounts help you:
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Spot profit and loss issues early
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Track performance of individual projects
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Stay on top of cash flow
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Ensure accurate revenue recognition (e.g., Work in Progress)
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Make better business decisions
✅ What Your Construction Management Accounts Should Include
Here’s a clear breakdown of the essential components:
1. Profit & Loss Account (P&L)
Clearly shows your monthly and year-to-date profitability:
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Total Revenue (invoiced and accrued)
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Cost of Sales (direct labour, materials, subcontractors)
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Gross Profit (Revenue minus Cost of Sales)
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Overheads (office, admin, salaries)
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Net Profit (after all costs)
Tip: Compare actual vs budgeted figures for better insights.
2. Balance Sheet
A monthly snapshot of your financial position:
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Assets (bank balances, plant & machinery, outstanding invoices)
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Liabilities (supplier bills, VAT, PAYE, subcontractor retentions)
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Equity (shareholder funds)
Reviewing this monthly helps you see your liquidity, debt position, and working capital clearly.
3. Cash Flow Forecast
Arguably the most important part for construction businesses:
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Cash in (expected payments from clients)
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Cash out (payments due to suppliers, subcontractors, VAT, PAYE)
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Projected monthly bank balance
This highlights any cash flow gaps in advance—essential for managing projects smoothly.
4. Work In Progress (WIP) Report
Tracks income from ongoing projects where work has been done but not yet invoiced:
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Project value
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Amount invoiced vs amount still to invoice
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Costs incurred but not yet recognised
Crucial for accurate revenue reporting—and avoiding inflated profits.
5. Project-Level Reporting
Your management accounts should include clear reporting for each active project:
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Revenue, cost, and margin per job
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Labour and materials variances
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Profitability trends by project or client
This lets you quickly identify problem projects before they impact your whole business.
6. Key Performance Indicators (KPIs)
Track these essential KPIs each month:
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Gross margin % (by project and overall)
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Net profit %
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Cash position (bank balance and working capital)
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Debtor days (average days clients take to pay)
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Creditor days (how long you take to pay suppliers)
🛠️ How to Prepare Your Management Accounts (Step-by-Step)
Step 1: Gather Your Data
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Bank statements and reconciliations
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Supplier invoices and subcontractor payments
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Labour cost data
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Project costings and budgets
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Invoices issued to clients
Step 2: Update Accounting Software
Use cloud software like Xero, QuickBooks, or Sage. Keep your records fully reconciled monthly.
Step 3: Prepare Project-Level Reports
Ensure every job is tracked separately for accurate profit/loss by project.
Step 4: Create Your Monthly Financial Statements
Clearly prepare your P&L, Balance Sheet, Cash Flow Forecast, and WIP report.
Step 5: Include Commentary
Always provide explanations for significant variances, overspends, or missed targets.
📅 When Should You Prepare Management Accounts?
Aim to produce your management accounts by the 15th of each month, covering the previous month’s data. This ensures the information remains relevant and actionable.
🚫 Common Mistakes Construction Companies Make
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Ignoring Work in Progress: Leads to inaccurate profits
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Late or inconsistent reporting: Less actionable insights
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Only reviewing accounts quarterly or annually: Missing issues until it’s too late
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No commentary or analysis: Harder to interpret the numbers
👷♂️ Real-Life Example: How Monthly Management Accounts Transformed One Construction Firm
A £4 million turnover contractor we helped had poor cash visibility and frequently ran into overdrafts.
We introduced monthly management accounts, clearly showing:
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Cash flow forecasts
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Accurate WIP reports
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Project-level margins
Within six months:
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Cash flow stabilised
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Margins increased by 6%
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They could confidently take on larger, more profitable projects
📞 Need Help Preparing Management Accounts?
At Thomas Emlyn Ltd, we specialise in producing clear, accurate monthly management accounts specifically for construction businesses.
We’ll help you:
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Understand exactly how your business is performing
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Improve cash flow and profitability
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Make proactive decisions
📞 Book a discovery call today and take control of your numbers.
📌 Final Thoughts
Monthly management accounts are your roadmap to a profitable construction business. Don’t fly blind—get the visibility, clarity, and control you need.
