Month-End Close, Job Close & the Tax Methods That Matter

Welcome

Hello, and welcome. This is Super Structures General Contractors — a national general contractor headquartered in Powhatan, Virginia — here to help you and your clients build something that lasts. We're glad you're with us, and we look forward to connecting with you.

Alright, Month-End Close, Job Close & the Tax Methods That Matter. Don't let the plain title fool you. Cut through everything, and it's this: A disciplined monthly close turns job cost into statements you can run the company on — and the right tax method, chosen with your CPA, can be worth real money. Get comfortable here and year-end stops being a crisis.

A contractor's books are only trustworthy if they're closed on a schedule with a checklist. The close is where job cost, the WIP, and the general ledger are forced to agree.

The month-end close checklist

• Cutoff — all costs through month-end recorded, including accrued sub pay apps and material received but not invoiced.
• Job cost review — miscoded costs corrected; every cost on a job.
• ETC review — PMs' forecasts updated and approved.
• Billing — all pay applications issued; retainage receivable updated.
• WIP schedule — built, reconciled to the GL, revenue and over/under billing entries posted.
• Reconciliations — bank, AR aging (including retainage), AP aging (including retainage payable), payroll liabilities, equipment and burden pools, intercompany if any.
• Statements — income statement, balance sheet, WIP, completed contracts, and a short management commentary. Target: issued by the 15th of the following month.

Job close

When a job reaches final completion: resolve final change orders, reconcile every subcontract and PO (committed, invoiced, paid, retainage), release retainage payable per the contracts, collect final retainage receivable, move the job to the completed-contracts schedule, and compare final margin to original. Then close the job number so no new costs can land on it.

Tax methods (with your CPA)

Tax accounting for contractors has its own rules, and they change. In general terms:

• Larger contractors generally must use the percentage-of-completion method for tax on long-term contracts.
• Smaller contractors under the IRS gross-receipts threshold (indexed annually; roughly in the high-$20-millions as of recent years) may be eligible for exempt-contract methods, such as completed-contract or cash, that can defer tax.
• Home construction contracts have their own exceptions.
• Contracts that span year-end may be subject to look-back interest calculations under the percentage-of-completion method. The right choice depends on your size, entity type, and contract mix. A CPA who specializes in construction will model it.

Going Deeper (Intermediate)

Accruals are the most-skipped step. A sub that did $200,000 of work in March but invoices in April must be accrued in March, or March's percent complete, revenue, and margin are all wrong. Build the accrual from the PM's verified percent complete on each subcontract.

The AR aging should separate current billings from retainage, because retainage isn't collectible until the contract says so and lenders exclude it from the borrowing base.

Advanced / Pro-Level

Pros keep book and tax on different methods when it pays: GAAP percentage-of-completion for the surety and bank, an exempt method for tax where eligible, with the CPA tracking the deferred tax difference. They plan year-end in October — which jobs will complete, what the WIP will show, estimated tax payments — instead of discovering it in March.

They also run internal controls around the close: segregation of duties between who approves pay apps and who issues payments, dual signatures over a threshold, positive pay with the bank, and a monthly review of vendor master changes — because construction's large payments and many vendors make it a frequent target of fraud.

Practice Challenge

It's April 10. The March statements show a $90,000 gross profit on the warehouse job. On April 12 the electrical sub's March pay app arrives for $150,000 of work done in March that wasn't accrued. What's wrong and what's the fix? (Answer: March cost to date is understated by $150,000, so percent complete, earned revenue, and margin are overstated — the real March profit is lower and the job may be underbilled; accrue the pay app into March (or restate if issued), and fix the process so sub accruals are based on PM-verified percent complete at cutoff, not on invoice arrival.)

In Practice

A contractor that closes by the 15th with a reconciled WIP runs the company on last month's facts. A contractor that closes at year-end runs it on last year's.

Common Mistakes to Avoid

• No accruals for sub work performed but not yet invoiced
• Closing the books without reconciling the WIP to the GL
• Jobs left open for years collecting stray costs
• Choosing a tax method by default instead of by analysis with a construction CPA

Takeaway: A disciplined monthly close turns job cost into statements you can run the company on — and the right tax method, chosen with your CPA, can be worth real money.

Educational content — not accounting, tax, or legal advice. Accounting methods and tax rules depend on your entity, your size, and your contracts; work with a CPA who knows construction.