Construction accounting guide
Percentage of completion accounting, in plain English.
The short answer
Percentage of completion (POC) accounting recognizes revenue as work is performed instead of when cash lands or when the job closes. The standard formula is cost-to-cost: percent complete = costs to date ÷ total estimated job cost, and revenue earned = percent complete × contract price. The gap between what you've earned and what you've billed is your over/under billing — the number banks and sureties look for first.
Founder, Accelerate Business Solutions · Published August 21, 2026 · Last updated August 21, 2026
Sound familiar?
What happens when revenue follows the bank account
Deposits masquerading as revenue
A $90,000 progress draw lands and the month looks great — even though the work behind it cost $104,000. Cash-basis books can't tell the difference.
Feast-and-famine months that aren't real
Three quiet months then one monster month, none of them accurate. You're steering the company on revenue timing, not performance.
Profit fade discovered at year-end
The job bid at 22% margin quietly erodes through change orders and slow draws. Without POC, you find out when the tax return is prepared.
Over-billing that feels like winning
Billing ahead of work feels like great cash flow — until the remaining work has to be finished with money you've already spent.
Estimates that never get revisited
The original estimate stays frozen in the spreadsheet while costs drift. POC forces the re-estimate conversation every single month.
A bonding application you can't support
The surety asks for a WIP schedule with over/under billing by project. Without POC running monthly, producing one is a scramble.
Trusted by business owners who run on real numbers
A worked example
One project, the cost-to-cost math
A $500,000 custom home, estimated to cost $400,000, halfway through the schedule. Here's the calculation a WIP schedule runs every month:
| Contract price (incl. approved change orders) | $500,000 |
| Estimated total job cost | $400,000 |
| Costs incurred to date | $200,000 |
| Percent complete ($200,000 ÷ $400,000) | 50% |
| Revenue earned to date (50% × $500,000) | $250,000 |
| Billed to date | $210,000 |
| Under-billed (earned revenue − billed) | $40,000 |
Read the last line carefully: the company has earned $250,000 but only billed $210,000 — it's $40,000 under-billed, an asset on the balance sheet representing work performed but not yet invoiced. Flip the numbers and you're over-billed: a liability, because you owe the customer work you've already collected for.
What you get every month
POC, run for you every single month.
The formula is simple. The discipline underneath it — accurate per-job costs, current estimates, monthly re-measurement — is where most setups fall apart. That's the part we own.
Job costing that feeds the formula
Every cost coded to a project and cost code the day it happens, so 'costs to date' is a real number — not an estimate of an estimate.
Monthly WIP schedule
Contract value, costs to date, estimated cost to complete, percent complete, earned revenue, and over/under billing for every open project.
Estimate re-measurement
Cost-to-complete revisited monthly with your project managers. When a job's estimate moves, the books move with it — that month.
Over/under billing booked properly
Earned vs. billed reconciled and booked so the balance sheet tells the truth — and an underwriter can follow it.
Profit-fade early warning
Margins tracked per project against the original bid. When a job starts fading, you hear about it while there's time to act.
Surety- & bank-ready reporting
Statements and WIP in the format underwriters expect, produced monthly — so a bonding application is a print job, not a project.
Signs you need POC, not cash-basis
- Projects run longer than a couple of months
- Your best and worst months don't match how busy you were
- A bank or surety has asked for a WIP schedule
- You couldn't say what you've earned vs. billed today
- Year-end profit never matches what the year felt like
Who this fits
- General contractors and custom home builders
- Remodelers and design-build firms running long projects
- Commercial contractors pursuing bonded work
- Companies roughly $1M–$10M with several projects open at once
- Owners who want monthly truth, not year-end surprises
Fixed monthly pricing starting as low as $600, based on transaction volume and active jobs. You'll get an exact number on the first call — not a range that grows later.
Percentage of completion questions, answered
Is percentage of completion accounting required?
It depends on who's reading your numbers. For GAAP financial statements, long-term construction contracts are generally recognized over time as work is performed (ASC 606). Sureties and banks expect POC-based statements and a WIP schedule when you apply for bonding or credit. For taxes, long-term contracts generally must use POC unless you qualify for the small contractor exception — contracts expected to finish within two years and average gross receipts under the IRS threshold. Your CPA makes the tax call; we keep the books so either method is supported.
What's the difference between percentage of completion and completed contract?
Completed contract waits until the job is done to recognize any revenue or profit — so a six-month project shows zero revenue for five months and a giant spike in month six. Percentage of completion recognizes revenue as work is performed, so every month reflects what actually happened on the job. Completed contract is simpler but hides profit fade until it's too late to fix.
What is the cost-to-cost method?
The most common way to measure progress: percent complete equals costs incurred to date divided by total estimated job cost. If you've spent $200,000 on a job estimated to cost $400,000, you're 50% complete, and you've earned 50% of the contract price. It works because costs track work performed — as long as your cost coding is accurate, which is where most DIY setups break down.
What happens when my cost estimate changes mid-project?
You re-estimate and take a catch-up adjustment in the current month. If a project estimated at $400,000 of cost is now tracking to $440,000, the percent complete recalculates and the revenue you've recognized adjusts with it. This is exactly why POC is valuable: the margin erosion shows up in the month it happens, not at year-end.
Can QuickBooks Online do percentage of completion accounting?
Not automatically. QBO tracks the per-job costs beautifully when they're coded correctly, but the POC math — percent complete, earned revenue, over/under billing — happens on a WIP schedule, with adjustments booked monthly. That's a process, not a button. It's exactly the process we run for builders every month.
Keep reading:
- The WIP schedule, explained — the report where POC lives — with a sample schedule you can read in two minutes.
- Construction accounting services — POC reporting, WIP schedules, and bank-ready financials as a monthly service.
- Free job cost calculator — price a job and see the margin before you sign the contract.
- Bookkeeping & job costing for contractors — the full picture for the trades, all in one place.
- Job costing in QuickBooks: a contractor's guide — the five-step setup that shows which jobs actually make money.
- How much does bookkeeping cost in 2026? — DIY vs. full-time hire vs. fractional, with real numbers.
Client results
What owners say after the books are handled
Shannon got our books cleaned up and finally showed us which jobs were actually making money. We stopped guessing on bids and our margins went up because of it.
Having Shannon handle the bookkeeping took a huge weight off. Everything is closed on time, the numbers make sense, and I get my evenings back instead of fighting QuickBooks.
Want POC numbers without doing POC math?
Free 30-minute consult. Bring a project — we'll walk the cost-to-cost math on it together and show you what your books would say under POC.
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