The Biggest Year-End Accounting Mistakes Construction Companies Make — And How to Avoid Them in 2026

As we approach the end of the year, construction companies across the Greater Toronto Area, including Kitchener, Cambridge, Waterloo, Hamilton, and Burlington, are preparing their books, taxes, and financial reports for year-end. For many contractors and construction business owners, this is a critical time to review financial performance, clean up accounting records, and avoid costly mistakes that can impact profitability and compliance in 2026.

End-of-year accounting for construction companies is more than just closing the books. It involves reviewing job costing, work-in-progress (WIP), GST/HST reporting, payroll, subcontractor compliance, and cash flow planning. Unfortunately, many construction businesses make the same year-end accounting mistakes every year—mistakes that lead to higher taxes, missed deductions, inaccurate financial statements, and cash flow challenges in the new year.

Whether you’re a general contractor, subcontractor, or construction company, proper year-end planning can make a significant difference. Identifying common accounting and tax mistakes now can help your construction business start 2026 with stronger financial control, better decision-making, and fewer surprises.

In this article, we’ll break down the most common end-of-year accounting mistakes construction companies should avoid in 2026—and what you can do now to stay ahead.

1. Not Reviewing Job Costing Before Year-End

One of the most common issues we see is contractors waiting until tax time to look at job costing. By then, it’s too late to fix errors or understand where money was actually made—or lost.

If job costs aren’t up to date, your financials don’t reflect reality. Materials may be sitting in the wrong job, labour might be underreported, or change orders may never have been captured.

How to avoid it in 2026: Before year-end, review every active and recently completed job. Make sure:

• Labour is coded correctly

• Materials are assigned to the right project

• Change orders are recorded

• Profit margins actually make sense

Accurate job costing isn’t just accounting—it’s how you price better and protect margins next year.

2. Ignoring Work-in-Progress (WIP)

WIP accounting is one of the most misunderstood parts of construction accounting, and ignoring it can seriously distort your numbers.

Without proper WIP tracking, you may:

• Overstate or understate revenue

• Pay tax on income you haven’t actually earned

• Think you’re profitable when you’re not (or vice versa)

  
  

How to avoid it in 2026: Make sure WIP is reviewed and adjusted before year-end. This includes:

• Percentage of completion

• Progress billings

• Costs incurred to date

If WIP feels confusing, that’s normal—but it’s also a sign you need support. Getting this right can make a huge difference in your financial clarity.

3. Mixing Personal and Business Expenses

This one never goes away. Personal meals, vehicles, phone bills, or travel expenses often end up running through the business without proper tracking.

At year-end, this creates:

• Messy books

• Missed deductions

• CRA audit risk

  
  

How to avoid it in 2026: Clean up shareholder and owner expenses before December 31:

• Review general ledger accounts

• Reclassify personal expenses

• Make sure reimbursements are properly recorded

Clean books make tax planning easier—and cheaper.

4. Forgetting About GST/HST Adjustments

GST/HST errors are especially common in construction. Progress billings, holdbacks, and timing issues often lead to incorrect filings.

Common problems include:

• Charging tax incorrectly

• Missing GST/HST on change orders

• Not reconciling GST/HST accounts at year-end

  
  

How to avoid it in 2026: Before the year closes:

• Reconcile your GST/HST accounts

• Review large or unusual transactions

• Confirm tax treatment on progress billings and holdbacks

Fixing small GST/HST issues now can prevent painful reassessments later.rs to check in regularly, rotate responsibilities, and promote time off after high-overtime periods. Employees who feel protected are more loyal, more engaged, and more productive.

5. Leaving Payroll and Subcontractor Issues Until January

Year-end is not the time to realize payroll wasn’t set up properly or subcontractors weren’t tracked correctly.

Mistakes here can lead to:

• Incorrect T4s and T4As

• CRA penalties

• Frustrated workers and subcontractors

How to avoid it in 2026: Before year-end:

• Review payroll records

• Confirm subcontractors vs employees

• Make sure T4 and T4A information is complete

This saves a ton of stress in February.

6. Not Doing Any Tax Planning at All

Many construction companies treat taxes as something that just “happens” after year-end. That’s a missed opportunity.

Without planning, you may:

• Pay more tax than necessary

• Miss out on deductions

• Have cash flow issues when taxes are due

How to avoid it in 2026: Even basic tax planning can help:

• Timing income and expenses

• Reviewing asset purchases

• Planning bonuses or dividends

A short conversation before year-end can lead to big savings.

Final Thoughts

Year-end doesn’t have to be overwhelming. For construction companies, it’s the best time to step back, clean things up, and set the foundation for a stronger year ahead.

Avoiding these common year-end accounting mistakes can help you:

• Start 2026 with accurate numbers

• Improve cash flow

• Reduce tax surprises

• Make better business decisions

And if you’re not sure where to start, that’s okay. Construction accounting is complex—but you don’t have to figure it out alone.

If you’d like help reviewing your year-end numbers or planning for 2026, now is the perfect time to do it.