10 “Obvious” Accounting Habits Every Contractor Should Nail Down
Ever tried to drive a screw with a hammer, or tighten a nail with a wrench? Of course not. That's exactly what bad accounting habits look like to us as a CPA firm — painfully obvious. But to many contractors, it's not so apparent. That's why we're calling these "obvious" habits: they're the kind of things that are second nature to a construction-focused CPA firm like us — but in the real world, even experienced contractors sometimes miss them.
If you've been in business a while and already have your systems dialed in, you can probably skip this article, but if you're newer to running the business side or you've been doing the books yourself, this list can save you a lot of headaches (and money).
As a CPA firm we follow these habits pretty much automatically. They're the building blocks of keeping your financial house in order — but for many business owners, they're not so obvious until a problem pops up.
1. Get a dedicated business bank account and business credit card in your business's name
Run all business expenses — and only business expenses — through them. No comingling with personal funds. This keeps your books clean, makes tax time easier, and protects you legally. It also makes it easier to prove your expenses are "ordinary and necessary" for your business if the IRS ever comes asking. For those just starting out, we recommend checking out Relay for banking and Capital One Spark for credit cards.
2. Enter all customer invoices into your accounting system
Include payment terms, invoice dates, due dates, and correct customer information — legal name, address, email, and phone number. This feeds your Accounts Receivable (A/R) aging report, which shows who owes you money and for how long. Without it, you risk forgetting to collect and hurting your cash flow.
3. Enter all vendor bills as soon as you get them
Include proper due dates and accurate vendor details. This feeds your Accounts Payable (A/P) aging report, which shows who you owe and when it's due. Without it, you risk late fees, strained vendor relationships, or paying too early and draining cash. For subcontractors, also collect W-9s and Certificates of Insurance before payment to stay compliant and protected.
4. Enter all payments — outgoing and incoming — as soon as they happen
For outgoing payments, this is especially important with checks since they may not clear for weeks. If they're not in your books, your balance will look higher than it really is. For incoming payments, record them the day you receive them, not when you deposit them. Under the IRS's constructive receipt rules, a check counts as income the moment it's delivered to you — even if it sits in your truck or desk drawer for a week. Use your accounting system's undeposited funds feature to hold them until you actually make the deposit. And document everything: snap a photo of each check received and each check written on the day it happens.
5. Reconcile your bank and credit card accounts every month
Reconciling means comparing what's in your books to the statement and explaining any difference. The goal is to have only a few reconciling items — like outstanding checks — each month. If you've got a long list, or really old items that haven't cleared, something's off and needs fixing.
6. Understand your payroll obligations — and get them right
Payroll is often the largest cost in construction, and mistakes here can take years to fix and cost thousands in penalties and interest. This includes paying employees correctly, filing payroll taxes on time, and knowing the difference between W-2 employees and subcontractors. There is no such thing as a "1099 employee" — if they're on a 1099, they're a subcontractor and should be treated as such. That means requiring a Certificate of Insurance (COI), a completed W-9, and an invoice before paying them. Getting this right will make your annual audit from your insurance company go smooth and easy.
7. Know how to pay yourself the right way
The rules depend on how your business is structured. If you're a sole proprietor or a single-member LLC taxed as a sole prop, you take owner's draws, not payroll. If you're taxed as an S corporation, you should generally be on payroll and get a W-2 — plus you can take additional distributions. Understand that draws and distributions come out of the equity section of your balance sheet, not your profit and loss statement. Getting this wrong can cause tax problems, mess up your books, and make it hard to see your true business performance.
8. Keep your chart of accounts clean and built for construction
Your chart of accounts is the foundation of your financial reporting. Materials, subcontractors, labor, equipment, and overhead should each have their own category — not lumped together. It should be organized so you can easily pull job cost reports, see which areas are driving profit, and identify where money is leaking. A messy chart of accounts gives you messy reports, and messy reports lead to bad decisions. Keeping it clean means your P&L and balance sheet aren't just for tax prep or bonding — they become real tools for managing your business day-to-day.
9. Review your financial reports every month
Don't wait until tax time or when a bonding agent asks. Look at your P&L, balance sheet, and job cost reports on a regular schedule — monthly at minimum. Compare actual results to your budget and to past months. Ask "Do these numbers make sense?" and "If not, why?" This is where you catch mistakes, see early warning signs, and adjust course before problems get expensive.
10. Hire a construction-focused bookkeeper and tax preparer — or a firm that does both
QuickBooks Online is not a DIY tool for contractors, and AI will not do your bookkeeping and taxes for you correctly, no matter what anyone says. Technology can help, but it still takes a trained human to set things up right, keep them accurate, and interpret what the numbers mean for your business. Having the right team in your corner is the single biggest difference between books you can trust and books that just "look fine" until there's a problem.
Why all of this matters:
You can't run a business profitably on incomplete or inaccurate information. These basics are the foundation for job costing, cash flow forecasting, tax compliance, and making smart business decisions.
Get them right, and the rest of your financial picture becomes much clearer. Get them wrong, and you'll always be playing catch-up.
Ready to get these habits locked in for good?
Schedule a discovery call with us. We'll review where you're at, point out what's missing, and help you build a financial system that works as hard as you do in the field.
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