A construction company does not need an unusual chart of accounts. It needs its country's standard chart, plus a small set of accounts that follow material from purchase to use: material in stock, material received but not yet billed, and material used, by trade. Those accounts belong inside the country's own numbering, next to the standard accounts that do the same job. Each site is followed with a cost centre, not an account of its own.
Why the standard chart is not enough
Standard charts are written with trading companies in mind: one stock account, one cost of sales account. A construction company buys material that is delivered to a site, waits in the site's store and is used weeks later on a particular piece of work. If all of it goes to one expense account on the day it is bought, the books cannot answer the questions that matter: how much material is on our sites, what each site has used, and which trade is costing more than planned.
That holds whether or not your accounts are ever published. The point is to see where material and money go.
The accounts to add
Account | Kind | What it shows |
Material stock, one for each material group | Asset | Material bought and not yet used, wherever it is stored |
Material received, not yet billed | Liability | Material that has reached a site before the supplier's bill |
Material used, one for each trade | Cost of works | Material taken from the store and built in |
Contract work | Cost of works | Work done by contractors hired on contract orders |
Advances to contractors and suppliers | Asset | Money paid before the work is done or the material arrives |
Opening balance adjustments | Clearing | Used once, when your balances move into a new system |
Two rules keep this small:
- One account for each material group or trade, not for each material. Fifty kinds of tile do not need fifty accounts.
- One cost centre for each site, not one account for each site. Sites open and close every year; accounts should not. With the site on every entry, any account can be reported site by site.
Where they go: follow the country's numbering
Every country numbers its chart its own way. Some charts start expenses with 4, others with 5 or 6; France keeps stock in class 3; the common German chart uses four-digit numbers. An account that ignores the local pattern lands in the wrong place in every report and puzzles every accountant who opens the books.
The rule: put each construction account right after the standard account that does the same job, with the same number of digits. Material stock goes behind the chart's own stock account, material used behind its expense account for purchases, and material received but not billed behind its own account for goods received.
For example, this is where Sitely's material stock accounts start in five countries:
Country | Material stock |
United Arab Emirates | 103021 |
India | 100311 |
France | 310001 |
Germany | 3971 |
United States | 110101 |
The same account doing the same job, numbered five ways, each where a local accountant would look for it.
How material moves through the accounts
Take 1,200 concrete blocks bought at 9.50 each for one site.
- The blocks arrive and are counted. Debit material stock (blocks) 11,400; credit material received, not yet billed, 11,400. The site's store now holds 1,200 blocks worth 11,400.
- The supplier's bill arrives. Debit material received, not yet billed, 11,400; credit the supplier 11,400. The bill matches the delivery, so nothing is paid for blocks that never came.
- The site uses 400 blocks. Debit masonry material used 3,800; credit material stock (blocks) 3,800, with the site on the entry.
At the end of the month the balance sheet shows 7,600 of blocks still in store, the site shows 3,800 of masonry material used, and the account for material received but not billed is back to zero. When it is not zero, a delivery is waiting for its bill or a bill for its delivery: a one-line check on your purchasing.
Common mistakes
- An account for every site: the chart grows every year and sites cannot be compared.
- One "materials" expense account: purchases go straight to expense and the stock on site is invisible.
- Rebuilding the country's chart around construction: your accountant, auditor and bank expect the standard numbers. Add to the chart; do not replace it.
- No account for material received but not billed: deliveries and bills cannot be matched in the books.
How Sitely does it
When you open a Sitely workspace, you choose your country. Sitely installs that country's standard chart, which it has for more than a hundred countries, or a clean general chart in your currency everywhere else. It then adds more than a hundred construction accounts of its own, each numbered to sit next to the standard account that does the same job, as in the table above.
After that, the entries make themselves. Receiving material at a site, the supplier's bill, using material and counting a store each post to the right accounts, so the books follow the material from the order to the work. Your accountant opens a chart in the numbering they know, with the construction accounts already in place.
See everything Sitely includes on the Product page, or try it with your own country's chart: the first 15 days are free.
Questions people ask
Does a construction company need a special chart of accounts?
No. It needs its country's standard chart plus a few accounts for material and site costs, placed in the standard numbering.
Should each project have its own account?
No. Give each project or site a cost centre, and report any account by cost centre.
What is "material received, not yet billed"?
An account that holds the value of material delivered before the supplier's bill arrives. It returns to zero when every delivery has its bill, which makes it a quick check on purchasing.