The construction sector in Saudi Arabia operates within an environment of massive, concurrent projects; yet, many companies manage their accounts using the same logic applied by general trading firms—tracking revenues and expenses at the entity level. The result is a recurring scenario: the company appears profitable on its financial statements but suffers from a cash crunch, unable to identify which specific project is eroding the profits of the others. Consequently, construction accounting software differs fundamentally from general accounting software: its primary unit of measurement is the project, not the company itself.
Why is general accounting unsuitable for construction?
Because construction involves five characteristics not found in standard commercial business:
•    Revenue is not recognized upon delivery but rather incrementally, based on the percentage of completion.
•    Collection is contingent upon approved payment certificates (progress billings) and may be delayed for months after the work is executed.
•    A portion of the amount due is withheld as a performance guarantee, payable only after the maintenance period concludes.
•    Change orders modify the contract’s scope and value during execution.
•    Costs are allocated to specific line items, activities, subcontractors, and equipment, rather than to general expense accounts.
Any system that fails to account for these five factors will not provide an accurate picture of your project's profitability.
Project Structuring: The Foundation of Everything
Before any accounting entry is made, the project structure must be established: the contract, its line items, quantities and prices, the schedule, and sub-cost centers. For each item in the Bill of Quantities (BOQ), the following are recorded:
Item | Usage
Contractual quantity and price | Basis for contract value and payment application
Cumulative executed quantity | Basis for calculating progress
Estimated cost of the item | Reference for comparison
Actual cost of the item | Materials, labor, equipment, and subcontracting costs

This structure enables the right questions to be asked—such as whether the concrete item in a project remains within its estimate or has exceeded it by 14%—questions that cannot be answered by a general accounting system.
The Payment Application Cycle
The payment application is the financial lifeline of construction contracting; managing it effectively requires a clear sequence:
1.    Quantifying work executed during the period based on BOQ items.
2.    Preparing the application using cumulative quantities, less the previous application.
3.    Incorporating approved change orders as documented items or adjustments.
4.    Deducting amounts due: advance payments, retention money, and any contractual deductions or delay penalties.
5.    Submission and approval by the consultant or client, while logging the dates of each stage.
6.    Issuing the invoice for the approved value.
7.    Tracking collection and the aging of outstanding payments.
The most critical element in this cycle is tracking retention money (work guarantee)—often the most overlooked amount in the sector. Many companies leave millions in retention held by clients for completed projects simply because no one tracks the release due dates. A robust system maintains a retention record for each project, including the release due date and a prior notification alert. Percentage of Completion and Revenue Recognition
The percentage of completion is calculated based on either cost (actual cost ÷ total estimated cost) or output (quantities executed ÷ contractual quantities). Revenue earned for the period is recognized based on this percentage, and three key metrics are monitored:
•    Estimated project profit at completion, tracked monthly; a recurring decline serves as an early warning sign.
•    Billing surplus or deficit: Have you billed more or less than the work executed? A deficit implies you are financing the project using your own cash.
•    Remaining obligations for unexecuted items.
Fikra Software’s cloud-based ERP system enables account management by cost center and project. Every material expenditure, subcontractor invoice, and labor cost is allocated to the specific project and line item, allowing for individual project profitability reports to be generated without manual consolidation.
On-Site Equipment and Assets
Heavy equipment and assets transferred between sites represent a significant portion of a contracting company’s assets—and are the items most prone to loss. Linking equipment records to projects via the asset and equipment management module tracks the location and custodian of each piece of equipment. Operating and maintenance costs are charged to the project utilizing the equipment, thereby revealing the true cost of each site.
Project Documentation File
Contracts, addenda, change orders, approved payment certificates, handover minutes, final settlements, bank guarantees, and consultant correspondence. These documents are your primary defense in any claim or dispute; losing an approved change order could cost you its entire value. Storing them within an electronic archiving system—linked to the specific project, with defined access permissions and an audit trail—ensures the file is ready for retrieval at a moment's notice.
Cash Flow: The Make-or-Break Metric
A company may be profitable on paper yet face a cash-flow standstill. Monitor the following monthly: submitted but unapproved payment applications; approved but uncollected applications (and their aging); due retention amounts; and subcontractor payment aging. The timing gap between cash outflow and inflow is the sector's greatest risk—a factor managed through precise data, not guesswork.
The Bottom Line
A proper construction accounting system measures every aspect of a project: revenue based on percentage of completion, costs by line item, and cash flow through the payment application and retention cycles. A construction company that tracks monthly project profitability can course-correct; those that only discover profitability after project handover are left with no choice but to record a loss.
Q: Does the system support multiple projects and cost centers?
A: Yes. You can define projects and sub-cost centers, allocate costs to their specific line items, and generate independent profitability reports for each project.
Q: How is retention (performance security) tracked?
A: Retention is recorded for each payment application based on the contractual percentage and release date, and it is included in the payables report for monitoring.
Q: Can the percentage of completion be calculated automatically? A: Yes, it is calculated based on executed versus contracted quantities, or actual versus estimated costs, depending on the company's approved policy.
Contact Fikra Software via the contact page to view a demonstration of comprehensive project management—from contract to final settlement—within the system.