How to Set Up a Chart of Accounts for a Multi-Entity Construction Company

Setting up a solid Chart of Accounts (COA) is one of the most important things you can do to ensure clarity, accuracy, and scalability in your construction business—especially if you're managing multiple entities. A well-designed COA lays the foundation for clean financial reporting across entities, jobs, and locations, while staying compliant with GAAP or tax reporting requirements.

Here’s a practical guide to building a construction-specific COA that’s ready for real-world complexity.

🔧 1. Start with a Scalable Structure

For multi-entity setups, your account numbering system should be structured enough to tell a story at a glance. That means using a consistent, hierarchical format that can grow with your business.

Example format:

Entity-Dept-Account-Sub

For example: 01-20-5000-01 This could represent:

This kind of structure keeps everything traceable—from cash in a specific bank account to labor costs on a specific project for a specific entity.

🏗️ 2. Use a Common Framework Across Entities

Even if you have multiple companies or divisions, it’s helpful to use a shared COA structure. This makes consolidation easier and gives you cleaner reports. Here’s a construction-focused account layout to get you started:

Assets 1000 – Cash – Entity A 1010 – Cash – Entity B 1100 – Accounts Receivable 1200 – Retainage Receivable 1300 – Construction in Progress (WIP) 1400 – Prepaid Expenses 1500 – Fixed Assets 1600 – Intercompany Receivables	Revenue 4000 – Construction Revenue – New Build 4100 – Construction Revenue – Remodel 4200 – Service Revenue 4300 – Change Orders 4400 – Retainage Earned
Liabilities 2000 – Accounts Payable 2100 – Credit Cards 2200 – Accrued Payroll 2300 – Loans Payable 2400 – Retainage Payable 2500 – Intercompany Payable	Cost of Goods Sold (COGS) 5000 – Labor – Direct 5100 – Subcontractors 5200 – Materials 5300 – Equipment Rentals 5400 – Permits & Fees 5500 – Job Site Costs (e.g., porta-potty, waste removal) 5600 – Trucking / Hauling 5700 – Workers Comp Allocation (Labor Burden) 5800 – Payroll Taxes – Direct Labor 5900 – Indirect Labor Allocation
Equity 3000 – Owner's Equity 3100 – Capital Contributions 3200 – Distributions	Operating Expenses 6000 – Salaries – Admin 6100 – Rent 6200 – Office Supplies 6300 – Software & Subscriptions 6400 – Marketing 6500 – Insurance (General Liability, Builder’s Risk) 6600 – Depreciation 6700 – Meals & Entertainment 6800 – Utilities

🧱 3. Track Entities, Projects, and Divisions Separately

Even with a shared COA, you’ll want to distinguish between entities and jobs using Classes, Locations, or Tracking Categories, depending on your accounting software.

Use these for:

• Legal entities

• Individual job sites or customer projects

• Service divisions (e.g., Commercial vs. Residential)

🔄 4. Set Up Intercompany Accounts

If you share expenses between entities (like a centralized payroll or office rent), create intercompany accounts to track who owes what.

• 1600 – Intercompany Due From [Entity X]

• 2500 – Intercompany Due To [Entity Y]

Use eliminations in consolidated reporting to keep things tidy and prevent double-counting.

🧾 5. Choose the Right Accounting Software

Your accounting tools should support multi-entity, project-based reporting:

• QuickBooks Online Advanced or Enterprise – Use Classes, Locations, and Projects

• Xero – Use Tracking Categories for jobs and entities

• Sage 100 Contractor / Foundation / Viewpoint – Purpose-built for construction accounting

✅ Best Practices

• Stay consistent across entities for clean consolidation

• Use account numbers to preserve logical order and improve usability

• Leave gaps between numbers (e.g., 5100, 5110, 5120) so you can add accounts later

• Create a COA guide that explains how and when to use each account

Need help building or customizing your COA? Or wondering if your current setup is holding you back? At Accounting for Clarity, I specialize in simplifying complex financial structures—especially for contractors and construction businesses.

📩 Reach out here or DM me on Facebook or Instagram to set up a consult.