skip to Main Content

Welcome to JNC’s Guide to Construction Accounting Terminology.

This A-Z guide covers the foundations of everything you need to know to understand the daily processes which are typically managed by construction companies – and often manually within spreadsheets and manual systems.

Before we delve into definitions, we must define the two halves of a contract that we will be using to help describe other terms throughout the guide.

Pre-Contract Phase

The ‘Pre-Contract’ phase is the preparation phase before a contract commences and includes different processes which need to be completed before winning a job. These processes include Bills of Quantities, Takeoff, Tendering, Estimating etc.

During the pre-contract phase, a multitude of processes can be actioned through construction-specific software to improve their accuracy and increase the speed of completion

We will be referencing Estimating Software throughout processes that are completed during the pre-contract phase. Our estimating module for Construction Manager is designed to help businesses produce accurate and consistent tenders and track budgets and costs effectively

Post-Contract Phase

The post-contract phase starts after a contract is won. This is when a company will be on-site, working on the job at hand and completing processes such as Job Costing, Purchase Orders, Applications & Retentions, Plant Hire etc.

During the post-contract phase, a variety of processes can be processed through construction-specific job costing software to increase efficiency, accuracy and the ability to communicate important information such as timesheets and purchase orders between site and back-office workers.

Here, we will be referencing construction-specific accounting software, specifically, Construction Manager.

To learn more, click the links below:

A-Z Guide


Accounts integration is the process of linking accounts packages (such as Sage) to construction-specific software and having a one or two-way flow of data. This flow of data is then used to perform specific processes such as generating live reports, updating accounts and tracking retentions.

Accounts integration isn’t specific to the pre or post-contract phase and depends on which accounts package and construction software you use.

Construction Manager integrates with Xero, Sage 50cloud and Sage Business Cloud Accounting.

Adjudication, also known as tender adjudication, is the process of turning estimates into an actual tender bid, ready to be submitted to a client. Adjudication is part of the pre-contract phase.

Our estimating module has powerful features that helps to benchmark and analyse estimates, with detailed reports and control of margins to provide you with the confidence to set competitive margins and tender more successfully. This, in turn, can help a company win more work.

An application, also known as an application for payments, is a document submitted by a contractor that outlines how much a contractor will be paid, and is aligned with the amount and quality of work completed. Applications are a post-contract phase process.

A good way to think about this is if a company has a contract to build two houses – they finish building one house, but haven’t started the other. Therefore, they can submit an application for payment for half the amount of the contract as they’ve completed half the work.

One thing to note, when it comes to valuing work, generating applications for payment promptly and tracking retentions owed or held by the business, many construction companies are daunted by the paperwork, spreadsheets and organisation required. In some cases they simply give up, which can lead to writing off money owed to the business.


A Bill of Quantity (BoQ) is a collection of work required to be carried out by the main contractor and is prepared by a consultant or quantity surveyor. The bill contains the quantity/ quality of work and materials that have been priced.  The BoQ is part of the pre-contract phase.

A budget in construction is a forecast of how much money a company expects to spend on a project/ job and includes an outline of what they’re going to spend the money on, including direct costs (on labour and materials) and overheads (renting work cabins and electricity use).

Budgets are drawn up in the pre-contract phase when bidding for work.


CIS, also known as Construction InCSdustry Scheme, is a sum of money deducted from sub-contractor payments by the main contractor which is then passed on to HMRC. This money is an advance towards the sub-contractors National Insurance and Tax Payments

Paying the money in advance gives the sub-contractors insurance to perform work onsite such as decorating, plumbing and electrical work, and is performed in the post-contract phase.

Using Construction Manager, subcontractor records are kept up to date with monthly returns produced with a single click. Automatically produce subcontractor certificates and statements as requested. CIS Tax is automatically deducted on payment certificates and online submissions go directly to HMRC.

Construction Skills Certification Scheme (CSCS) is a certification program that assesses the ability of contractors to perform quality work safely and effectively on site.

Verifying CSCS is necessary to ensure the safety of on-site workers and is a legal requirement. This process is part of the post-contract phase.

Cost Value Recognition (CVR) is the process of measuring the total costs of a project VS the budgeted costs. It can be also be thought of as actuals VS forecast.

CVR is usually performed by a Quantity Survey regularly throughout a project, and data gathered by them is used to produce CVR reports


Document Management refers to the handling of documents that are sent and received daily between clients, onsite workers, main contractors and subcontractors.

Managing these documents effectively is crucial to saving time and money; the last thing a contractor need is to miss paying an invoice from a material delivery on site.

Last March (2021),  the government enforced a domestic VAT reverse charge for building and construction services to prevent any ‘missing trader fraud’ from occurring.

The VAT reverse charge now places the responsibility on the customer or contractor to declare the VAT, removing the chance for undeclared finances going missing.


Enterprise Resource Planning (ERP) is a type of software that manages a company’s financials, supply chain, operations, commerce, reporting, manufacturing, and human resource activities.

Estimating, although an overarching term, refers to processes in the pre-contract phase. These include:

  • Pricing up projects and producing Bills of Quantities.
  • Measuring and pricing up jobs from a mixture of sources including 2D/3D drawings and specification documents.
  • Sourcing subcontractor quotes and quickly comparing most competitive prices vs quality and reliability of services.

Our estimating module is designed to help you produce tenders on time, as accurately and professionally as possible. With integrated on-screen takeoff and subcontractor enquiry portals, our estimating module can help you win more work, with larger profit margins.


Freelancer is a term often used when referring to a freelance Quantity Surveyor (QS). Freelance QS’, similar to an in-house Quantity Surveyor, is in charge of managing the costs associated with a construction project. Unlike an in-house Quantity Surveyor, a freelancer is usually hired for one job at a time.


Goods Received Notes (GRN)/ Delivery Notes is a receipt received on-site once goods and materials have been delivered. The document notes:

  • What goods/materials have been delivered
  • The quantity of goods/materials
  • The price of the goods/materials


Goods Received Notes (GRN)/ Delivery Notes is a receipt received on-site once goods and materials have been delivered. The document notes:

  • What goods/materials have been delivered
  • The quantity of goods/materials
  • The price of the goods/materials


Invoice recognition is the process of scanning invoices and creating digital versions for a company’s records. This assists in companies becoming a paperless environment.


Job Costing is the process of breaking down a job’s costs based on 1st principles (Labour, plant, materials, subcontractors). Job costing is performed throughout the lifecycle of a project/job to review the ongoing costs associated with the project and ensure you keep within budget. Unlike estimating, this is performed in the post-contract phase.


Key Performance Indicators (KPI) is an effective method for measuring different aspects of a job throughout its lifecycle. It’s performed pre and post-contract.

In construction, monitoring KPIs and creating actions to improve on is essential to performing work efficiently, to a high standard and within budget.

Some examples of great KPIs that construction companies use on their jobs are:

  • Profitability
  • Client Satisfaction
  • Waste
  • Variations and Retentions
  • Productivity


Land appraisal is the process of assessing the viability of land opportunities. This process includes making a strategic forecast, creating cash flow models, and reporting on business activity onsite. This is a pre-contract process.


The main contractor is the lead contractor of a project designated by a client. This contractor has the power to plan, monitor and manage on-site activity and has the main job of delivering the job to the client.

The main contractor receives control over the contract throughout the pre-contract phase.

The main contractor is also in charge of sub-contractors, which includes monitoring their on-site work, payments and safety.

Maintenance refers to planned and reactive maintenance works. Maintenance can be property repairs, servicing of buildings or other general regular up-keep.

Our software, Maintenance Manager, is a fully functional system that simplifies the management and administration of maintenance repair and service works. Designed to be easy to use and fast to operate, Maintenance Manager provides a single point of entry for all transactions.


NRM (New Rules of Measurement) and SMM (Standard Method of Measurement) are methods of pricing up materials during the pre-contract phase.

These pricing libraries are used to price up work when estimating jobs and creating tenders for clients.

Our estimating module uses Laxton’s Priced Libraries and has been designed to speed up the process of pricing of jobs with greater accuracy and reassurance. Laxton’s is the UK’s leading building price book containing a wealth of construction cost and industry-related information.


Takeoff is the process of determining the quantity of materials needed for a job. During the takeoff process, you identify the key areas of a construction project that can be priced and measured. This then allows you to produce a bill of quantity.

Using our estimating module’s on-screen takeoff, you can produce accurate takeoffs efficiently. With the ability to import and export from all file types including BIM, PDF and CAD, our estimating module uses live links between the DIM sheet and Takeoff allowing amendments and revisions to automatically update the bill of quantity.


Plant is a term used in the construction industry to describe machinery or heavy-duty apparatus to undertake industrial, construction and demolition activities. Plant can be forklifts, cranes, large foundation drills etc.

Hiring plant is a part of every construction project and is often seen as the most cost-effective option. However, it can be costly if looked over and not recorded correctly.

Procurement is the process of acquiring materials and labour/services to complete a job. 

However, when procuring materials and labour, there are a few key areas to consider:

  • The price of materials/ labour
  • The quality of materials/ labour
  • The speed of delivering materials/ labour

When approaching companies looking to procure, you need to be careful to consider the above as you need to remain within budget, on time and sustain a high level of quality.

A purchase order is a document issued by the buyer to the seller before any goods or money is transferred. This document lists the type of material, the number of materials, and the price agreed.

With so many different materials, suppliers and labourers on site, purchase orders in the construction industry can be difficult to manage.


A quantity surveyor (QS) is in charge of managing all costs associated with a construction project. A QS aids in producing the initial estimates through to completing budget requirements.

Using our estimating module, QS’ can help to produce accurate bills of quantities efficiently and consistently either manually, using templates or using Laxton’s integrated pricing library. Furthermore, with a sub-contractor enquiry portal, QS’ can manage sub-contractors through the online enquiry portal to manage the distribution of documents and revisions.

QuickBooks is an accounting software solution designed to manage income and expenses whilst keeping track of the financial health of a business.

However, construction companies are currently moving away from QuickBooks due to QB discontinuing support for their desktop version. The end of their desktop version also ends support of their Job Costing which isn’t available on their cloud product. Therefore, many construction companies are moving towards other accounting software such as Sage or Xero to manage their accounting processes.

A purchase order is a document issued by the buyer to the seller before any goods or money is transferred. This document lists the type of material, the number of materials, and the price agreed.

With so many different materials, suppliers and labourers on site, purchase orders in the construction industry can be difficult to manage.


In Construction, reporting is one of the most vital tasks that need to be performed (along with the job at hand of course!)

Due to the huge variety of processes that are performed through a job’s lifecycle, there are so many different reports used and needed on a daily, weekly and monthly basis. However, real-time reports/  live reports are vital to understanding how much work has been completed, the current financial position of a project and if anything needs to be changed to ensure the project is kept within budget.

Retentions can be split into two definitions:

  • Retention is a percentage held from the company by its clients under a contract to act as an assurance that the project will be completed to a high standard. It may even be held after a project is complete between 6 months to 1 year to ensure that no issues during the project arise.
  • Retention is a percentage held by the company from its sub-contractors or hired labourers to act as an assurance that the project will be completed to a high standard.


Sage is one of the most-used accounting software in the UK. At its core level, Sage provides visibility and efficiency to manage both finances and people.

A sub-contractor is a person or company which has been hired to perform work by the main contractor. The work which a sub-contractor performs is usually more niche and specialised as the main contractor can not perform it themselves. This work could be roofing, plumbing, steelwork etc.


A Tender is the submission main contractors make when they’re applying/ bidding for work. The tender includes a variety of documents and details which are curated throughout the pre-contract phase. These documents and details include:

  • Design proposals such as models and blueprints.
  • Pricing documents (for labour, materials from takeoff and other costs such as plant hire).
  • Construction Phase Plan (CPP) details health and safety procedures.
  • References and Experience documents to show prior projects undertaken.

After submitting a tender, the client may invite the contractor for negotiations to improve prices, the project timelines or to clarify areas of the job.

Timesheets are a method of recording the time staff or teams spend on a job, project or site. These sheets are then used to calculate the pay.


Managing retentions can be a difficult task, and we regularly speak to companies who have mentioned that they have lost significant amounts of money due to not requesting to receive retentions held against them.

Construction Manager has application and retention tracking facilities. Applications are produced without raising a VAT invoice and can include dayworks, variations and retention values.


A valuation is a process performed by a quantity surveyor, where they measure the quality of work and how much work has been completed so far into a project. After the work has been measured, the contractor responsible for the work can produce an application for payment to be paid.


Work in Progress (WIP) reports are reports used to monitor and track the progress of work on-site and then compare this information to cash spent and received. WIP reports contain a significant amount of information and are specifically used to check whether an active job has been overbilled or underbilled.

The WIP report, once generated, is used to monitor the cash flow of a project VS work completed. For example, it allows companies to see if they have completed 40% of a job, but only have been paid for 20%, ensuring they can raise applications for payment, get paid and have a positive cash flow.


Xero is cloud-based accounting software that is widely used in the SME/SMB space. In construction, it allows companies and sole traders to accurately record their costs, produce VAT returns and claim expenses.


When we reference young talent, we refer to graduates who are moving into the construction industry.


Zero Emissions, or being carbon neutral, is when the emissions related to the construction performed on a project and the stages of the project up to completion are zero. In the industry, many construction companies are moving towards using reduced emission methods of construction or using carbon off-sets/ renewable energy to balance their carbon footprint.

Back To Top