Article written by Brielle Regdos for CDP
For construction management companies, a well-structured Chart of Accounts (COA) is essential for tracking profitability, controlling costs, and making informed decisions. A logical numbering system keeps financial reports organized, easy to read, and scalable as the business grows.
Consistent numbering places every account into a predictable category based on its number. This allows owners and managers to quickly scan financial reports and understand what they’re seeing without digging through cluttered or miscategorized accounts.
For example, accounts in the 1000 range are assets—cash, receivables, and equipment. The 2000s are liabilities, or what the company owes. The 3000s represent equity. On the income statement, the 4000s show revenue, the 5000s track direct job costs like labor and materials, and the 6000–7000s cover overhead expenses such as office salaries, rent, and software.
Construction companies benefit greatly from a COA built around job costing and work-in-progress (WIP) tracking. Accounts for retainage, billings in excess of costs, and costs in excess of billings help show the true financial position of projects. Direct cost accounts should mirror how jobs are estimated—including labor, payroll burden, materials, subcontractors, equipment use, permits, and supplies—making it easier to measure gross profit by project.
Service companies use a similar structure but with less WIP complexity and more focus on labor and field costs. Revenue is often separated by service type, while direct costs center on technician labor, parts, subcontractors, and service vehicles, helping owners track service profitability and labor efficiency.
A well-designed COA turns financial statements into practical management tools. With clear numbering and logical groupings, construction and service companies gain the financial visibility they need to grow profitably and sustainably.
Contact CDP to learn more about chart of accounts setup for construction companies.
