Your Mid-Year Financial Checkpoint for a More Profitable Summer

For construction business owners, May isn’t just another month on the calendar—it’s a financial pivot point. With Q1 behind you and summer workloads rapidly approaching, this is your chance to review, refine, and reinforce your accounting systems before peak season exposes inefficiencies.

Construction accounting is uniquely complex, involving job costing, retention tracking, subcontractor compliance, and equipment depreciation. Now’s the time to make sure those systems are functioning properly—so your financials tell the real story. Below, we’ve outlined five essential accounting areas to prioritize in May.

1. Budget vs. Actual Monitoring

Job costing isn’t a “set it and forget it” process—it’s dynamic. Prices fluctuate, crews vary in productivity, and material delays impact the bottom line. May is the ideal month to conduct a full budget-to-actual variance analysis across all active projects.

Key actions:

• Pull job cost reports from QuickBooks or Buildertrend and compare original budgets to actual costs incurred (labor, materials, subs).
  
• Use percentage-of-completion metrics to ensure revenue recognition aligns with progress made—not just amounts billed.
  
• Identify systematic overages (e.g., framing labor consistently over budget) and adjust future bids or cost codes accordingly.
  

📊 This analysis supports more accurate bidding and protects your margins before projects enter the resource-heavy summer phase.

2. Cash Flow Planning

Construction cash flow isn’t linear—you may bill $100k in June, but not collect until August. In May, it’s critical to map cash inflows and outflows at a granular level to avoid liquidity shortfalls.

Technical steps to take:

• Build or update a rolling 8–12 week cash flow forecast, accounting for all known receivables and payables.
  
• Factor in retainage holds, change orders, payroll cycles, equipment purchases, and subcontractor payouts.
  
• Use historical burn rates per project type to estimate spend velocity—especially on fixed-price contracts.
  

🛠️ Proper forecasting now prevents reactive borrowing later—and positions you to seize growth opportunities with confidence.

3. Subcontractor Management

With increased IRS scrutiny on 1099 compliance and worker misclassification, your subcontractor records must be clean, complete, and audit-ready.

May to-dos include:

• Confirm all active 1099 vendors have submitted W-9s, and that their entity types (LLC vs. sole prop vs. S-corp) are recorded in QuickBooks correctly.
  
• Review payment records to ensure all subcontractor payments are coded to the correct cost accounts (not generic “contract labor”).
  
• Start tagging and tracking 1099-eligible payments monthly—rather than retroactively in January.
  

📂 A clean 1099 ledger now will save hours—and mitigate risk—come tax season.

Retainage is one of the trickiest parts of construction accounting, and it’s often mishandled. Whether you’re withholding funds from subs or waiting on retained earnings from clients, it needs to be reflected accurately in both systems.

Accounting best practices:

• Run a Buildertrend > QuickBooks sync audit to verify that retentions are recorded as separate line items (not lumped into AR or AP).
  
• Ensure your chart of accounts includes designated liability and asset accounts for retainage receivable and payable.
  
• Reconcile your retention balances with contract terms and draw schedules—particularly on multi-phase or design-build jobs.
  

💬 Improper handling can lead to overstatement of income or delayed cash realization.

5. Equipment Purchases or Leases

As crews ramp up, many contractors upgrade or acquire new equipment. These transactions must be recorded properly to ensure accurate financials and depreciation schedules.

Steps to take:

• Capitalize any purchase over your firm’s threshold (typically $2,500+) as a fixed asset in QBO—not as an expense.
  
• Assign the correct class, location, and asset type for each piece of equipment.
  
• If leasing, determine whether the arrangement qualifies as a finance lease (capitalized) or operating lease (expensed), per current accounting standards (ASC 842 or IFRS 16, if applicable).
  
• Schedule depreciation or amortization entries according to your accountant’s recommendations or the IRS MACRS guidelines.
  

🚜 Tracking equipment the right way ensures depreciation deductions are maximized and your balance sheet remains accurate.

🔍 Final Thought: Use May to Build Financial Strength Before Summer Strain

The construction industry doesn’t leave room for reactive accounting. Waiting until July or August to fix issues is often too late. May gives you the space to zoom out, assess financial integrity, and make meaningful adjustments.

At 24hr Bookkeeper, we specialize in helping construction companies align operational execution with financial strategy. From job costing audits to cash flow modeling and Buildertrend integration support, we make sure your systems work together to build clarity and profit.

📞 Ready to take control before peak season?
Schedule your Mid-Year Construction Accounting Review today