The Value of Advisory Services and Financial Planning Support From Contractor Accountants

Contractor’s accountancy requirements vary considerably from those of professionals and companies working in other sectors. This is down to several aspects, including the nature of project-based working and financing, complex payment systems between contractors, subcontractors and self-employed workers, and, of course, the regulations specific to the industry.

Many contractors assume general accountancy will be sufficient, and it might be for straightforward tasks like company formation services or compiling a set of annual accounts.

However, as we’ll see, this typically isn’t the case, and we often hear from contractors who’ve needed to search for urgent, specialist help in an emergency, where they’ve realised that a project or contract has left them in difficult financial circumstances or have been subject to an HMRC investigation.

Key Reasons Contractors Benefit From Working With Expert Contractor Accountancy Teams 

With years of expertise supporting contractor clients of every size, we strongly believe that a seasoned accountant who understands your business structure and model, and who has a depth of knowledge about the specifics of contractor accounting, is essential to long-term success and financial stability.

Our contractor accountants don’t limit their services to the basics of quarterly VAT returns or submitting tax returns for self-employed clients. We offer personalised advice and guidance, helping clients navigate every challenge that comes their way. That could include:

• Managing the finances related to individual contracts, performing risk appraisals and calculations to ensure a contractor never commits to a project with unmanageable risk, or where the margins for profitability are too slim.
• Optimising cash flows and payment schedules, monitoring incoming and outgoing expenses to ensure there is no potential to miss a tax payment deadline, or end up in arrears with an important supplier or subcontractor.
• Advising on compliance matters, ensuring clients remain up to date with tax, financial reporting, governance and payroll legislation and regulations.
• Offering customised advice about financing options, decisions around expansions or investments, and ensuring contractors take full advantage of available tax reliefs, offsets and allowances.
• Recommending efficiencies, such as upgrades to cloud-based software that can automate manual tasks, reduce time pressures linked to administration, and streamline reporting and tax calculation processes.

This is far from an exhaustive list, but the focus is on building long-term relationships with contractors who have the peace of mind of an experienced accountant maintaining oversight over their business.

The Role of Contractor Accountants in Managing Project-Based Finances

A majority of contractors work on a project-by-project basis, which requires a degree of specialised knowledge. This includes the ability to track costs and variables in real-time, maintain oversight of expenses, profit margins, and deadlines, and identify if anything begins to run off course in good time to make corrections.

Work in progress accounting is a fundamental part of contractor accountancy. It requires an accountant who is familiar with this level of monitoring and can accurately calculate the current value of a project, ensuring tiered payments are claimed promptly to avoid cash flow imbalances.

We mentioned briefly the use of cloud-based accounting software, which is often an easy way for busy contractors to keep close watch over projects, especially for larger contractors who may be managing multiple contracts simultaneously.

Having your own dedicated accounting team to refer to can make this significantly more time-efficient, with independent software recommendations and guidance on how to use reporting and remote-entry features to make your everyday bookkeeping simpler.

How We Help Contractor Clients Manage the Complexities of Their Payment Structures

Each contractor business may interact with numerous third parties, which makes it important that they have a thorough grasp of all the intricacies associated with making and receiving remittances. We ensure contractors keep up to date, accurate records, with support handling:

• Revenue recognition, knowing how and when revenues can be recognised and included within accounts, linking performance agreements and obligations with tiered payments, and ensuring that VAT and tax returns, alongside year-end accounts, report the correct revenues.
• Payment chains and the relevant tax obligations, where money originates with the owner or primary contractor, and is then distributed among other contractors and professionals. This creates a series of payments with common errors that arise when contractors misunderstand their obligations regarding CIS payroll deductions and the Domestic Reverse Charge.
• Progress payments, which refer to instalments made during a contract at pre-agreed phases. Contractors need a method to verify when that benchmark has been reached and to calculate the correct amount billable.

These services are just as important as VAT and CIS returns, because they enable contractors to improve and manage their profitability, optimise their cash flows, and incorporate tax planning into every decision.

Why Contractor Accountancy Services Enable More Detailed Financial Planning

Contractors need to analyse their financial performance continually to measure the success of each construction project, and to make decisions based on data, rather than assumptions about how well each project is progressing.

Our chartered accountants are well-versed in every element of financial planning, which means our clients have clear estimates, detailed budgets and controlled financial management processes that ensure they use their resources and budgets strategically and with full insight into how the business is performing.

Tax compliance is vital at every step, and our contractor accountants help client businesses navigate the obstacle-filled world of taxes with confidence, advising on Corporation Tax or Income Tax liabilities, National Insurance Contributions and compliance with the Construction Industry Scheme (CIS).

How to Access Support From Our Contractor Accountancy Team

Working alongside an accomplished construction accountant, as we’ve explained, is about accuracy, insight and a second opinion, whether you’re considering which contracts to bid for, unsure which projects will prove most viable or want to secure the right financing to ensure your business is financially healthy and sustainable.

If you’d like more information about the services available through our contractor accountants or have encountered issues with your project management and finances you’d like to resolve, you are welcome to get in touch with the specialists at James Todd & Co at your convenience.