Job costing and WIP schedules that hold up with a bonding agent.
Contractors are financed by their bonding capacity and their bank, and both read the work-in-progress schedule before they read the P&L. We produce contractor financials that survive that review — accurate job costs, a defensible WIP, and revenue recognized the way the method requires.
Bonding agents expect a current WIP; quarterly is generally too stale to underwrite.
Movement between estimated and final job gross profit that sureties consider well-controlled.
Sureties size bonding capacity largely from working capital and equity.
Where construction & contractors lose money on accounting.
Revenue recognition method drives the tax bill
Percentage-of-completion, completed contract, and the small-contractor exception each produce different taxable income in a given year. The method has to fit contract length, gross receipts, and the surety's expectations — and be applied consistently.
Over- and under-billings distort every month
Without a WIP schedule, billings ahead of cost look like profit and costs ahead of billings look like a loss. The correction lands in one ugly quarter. A monthly WIP moves the adjustment to where it belongs.
Retainage is cash you have earned but cannot spend
Retainage receivable and payable have to be tracked separately from ordinary AR and AP, or the cash forecast is wrong by the full amount held on every open job.
Worker classification and prevailing wage
California scrutinizes subcontractor classification, and public works adds certified payroll and prevailing wage. A misclassification finding is retroactive across every affected worker and year.
What a construction & contractors engagement includes.
- Job cost setup and cost-code structure in QuickBooks, Sage, or Foundation
- Monthly WIP schedule with over/under billing analysis
- Percentage-of-completion versus completed contract method planning
- Retainage tracking and 13-week cash forecasting
- Surety- and lender-ready reviewed or compiled financial statements
- Equipment purchase timing, Section 179, and bonus depreciation
- Worker classification review and certified payroll support
Construction & Contractors: direct answers.
What is a WIP schedule and why does my bonding company want it?
A work-in-progress schedule lists every open contract with the contract value, costs incurred, estimated cost to complete, percentage complete, revenue earned, and amounts billed. It reveals whether a contractor is overbilled — borrowing cash from future work — or underbilled. Sureties use it to judge estimating accuracy and to size bonding capacity.
Should a contractor use percentage-of-completion or completed contract?
Long-term contracts generally require percentage-of-completion for tax, but smaller contractors under the gross receipts threshold with contracts expected to finish within two years may qualify for an exception and use the completed contract method, which defers income. Financial statements for a surety are typically percentage-of-completion regardless.
How should retainage be recorded?
As a separate retainage receivable rather than blended into accounts receivable, with retainage payable to subcontractors tracked in the same way. Keeping it separate is what makes the cash forecast usable, because retainage is earned revenue that will not convert to cash until the job closes out.
What are the tax consequences of buying equipment before year end?
Section 179 expensing and bonus depreciation can allow a large portion of the cost to be deducted in the year the equipment is placed in service, not merely ordered. Whether that is the right move depends on the current-year margin, the following year's projected income, and the effect on the balance sheet the surety will review.
Ready to work with a CPA firm that treats your finances like their own?
Schedule a complimentary consultation with Selim Hanna, CPA, and see how strategic advisory can protect and grow your business.