Contractors and construction firms work on long-duration projects with milestone billing, retentions and multiple subcontractors. VVouch structures accounting around the project, not just the company, so profitability is visible while a job is still running.
Project Based Accounting for Contractors
A contractor’s real position sits at the project level, not the company level. We set up a cost code for every project and record materials, labour, plant and subcontractor costs against it. Each month we compare cost to date with budget and the contract value, so a project that is losing money is visible while there is still time to act.
Revenue Recognition, Retentions and Advances
Long contracts are normally recognised over time under IFRS 15, using progress measures such as costs incurred or work certified. Retentions held back by clients and advances received need to be tracked as separate balances, and bank guarantees and performance bonds need to be monitored against their expiry dates. Variation orders and claims should be recorded when they are agreed, not when the cash arrives.
VAT and Corporate Tax on Long Contracts
VAT timing on staged payments and retentions follows its own rules, and an error can move VAT into the wrong period. Our VAT team reviews contract terms before invoicing patterns are set. For Corporate Tax, we make sure revenue and costs on long contracts are measured consistently with the audited accounts.
Cash Flow and Subcontractors
Cash flow is the main risk for most contractors, because costs are paid before certificates are collected. Our management accounting pack includes a rolling cash forecast and an ageing of retentions and receivables. Lenders and main contractors often ask for audited accounts, which our external audit team prepares. For project controls, see our internal audit service.
Challenges
- Long-term contracts spanning multiple VAT periods and financial years complicate revenue recognition and VAT timing.
- Retentions, advance payments and milestone billing need to be tracked separately from straightforward invoicing.
- Managing subcontractor and supplier payments alongside project cash flow is difficult without project-level accounting.
- Corporate Tax and VAT obligations on contracts that straddle a company's financial year-end need careful handling.
How VVouch Helps
- Project-based bookkeeping that tracks retentions, milestone billing and subcontractor payments separately from general ledger entries.
- VAT advisory on long-term contracts, including the timing of tax points on milestone and advance payments.
- Corporate Tax registration and filing that accounts for revenue recognised across financial years.
- Management accounting that gives a real-time view of project profitability, not just company-wide totals.
