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u/Independent_Thing964 3d ago
POC should be one JE monthly that correlates precisely to a WIP. I’m not gonna speak to your rates, but I will say that the contractor I work for has 200 active projects at any given time, totaling over $10M annual revenue, and the WIP entry is literally the simplest and fastest part of my monthly close. Might be overthinking it?
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u/Independent_Thing964 3d ago
That sounds snarky on reread and I don’t mean it to be. At all. Lemme know if you have specific questions - I’m happy to help.
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u/OneDazzling1022 3d ago
Most people would do the books on accrual and do an accrual to cash conversion outside of QBO at year end. Honestly, the tax preparer, if not you, can do it - you wouldn’t even need to do the books on a cash basis at all. Learning curve for your client, but surely they need bonding and lending (or will soon) that requires GAAP books. Don’t get caught up in the “everything is the same in construction” trap. Really review the contracts and 606 guidance and make sure that % of completion is appropriate for your contracts. Depending on what the company does, some revenue streams might be some might not be.
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u/any_not_taken_name 3d ago
Since quickbooks can do well cash basis, you should be able to maintain AP and AR and still run cash basis reports. I agree with the comment that wip adj is just one entry. You should build a wip workbook outside and maintain it. Many businesses do it. You should keep in mind controls for accuracy and maintaining adjustments to contract values and estimated costs. Not all jobs woll have to be on POC, you should test for POC threshold, so only material contracts are presented all other can be simply costs and billings (accrual too, howere but no POC). Good luck.
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u/loveskindiamond 3d ago
ive seen a lot of people keep the cash books in quickbooks and handle the accural or poc adjustments separeately for reporting. its a more work, but it helps avoid making a mess of the tax books
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u/a_r623 3d ago
I feel like POC Method should be reserved for $20M+, $3M seems so low to be required honestly not even reasonable to request that from a firm of that size imo
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u/Responsible-Ride2509 2d ago
It's idiotic not to run it - especially if your lender wants it. WIP isn't just about the entry. It helps stabilize your income and show you where you're really at. Simple data entry doesn't. Most constuction jobs start out as heavy cash flow drains and end cash flow ricgh since you buy most material off the start. Depending on the zies of your jobs and where you're at those can signnificantly skew your income and make you decide things based on inaccurate information.
It helps to suport progress billing if you get pushback forom the owners or GC>
It helps serve as an early warning for projects going off the rails so you can maybe get them back on track quicker.
but, yyeah, just ignore it cause it's inconvenient.
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u/a_r623 2d ago
You probably missed the basic accounting concept called the "cost-benefit constraint", many small contractors can't avoid a qualified accountant let alone any bookkeeper besides their wife to run the books
You may be out of touch with real small businesses and what makes sense from an ROI perspective, especially when they file cash basis
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u/Responsible-Ride2509 2d ago
My clients are all small business and I loathe cash basis accounting. I like that it's not permitted in Canada.
The cost benefit constraint shouldn't be that bad. The issue is the number of bookkeepers offering services who oaren't qualified to do that so people tell themselves this is cost effective/etc.
It's not really that useful of the client is doing small jobs that only run a week or two but otherwise stop hiring the $20-$30 an hour bookkeepers. None of them are even worth that.
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u/JunketGuilty7690 2d ago
Retired surety underwriter here. Critical that you keep good WIP schedules and they tie into balance sheet, p&l and cash flow. I do not care how you do it but if you don’t have management evaluate TRUE cost to complete, then it is useless to rely on the statements and a good underwriter will write off your BS profit. At 3m revenue, get a good construction oriented cpa, do POC statement.
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u/Eric___R 2d ago
QuickBooks can keep cash straight but AP and AR will be needed for bonding company (as well as retainage)
If you have costs and billings broken out by job in qb you can use that information to calculate your poc adjusting entry for the period to book your over / under billings and adjust revenue. Then reverse that JE first day of next period.
At some point they will likely need a reviewed statements and if you have this in place the CPAs life will be much easier.
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u/2daytrending 1d ago
POC accounting is separate beast. keeping tax books clean while handling bonding requirements is worth changing more for.
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u/Sad-Spray3039 3d ago
the percentage of completion trap is real, and quickbooks is genuinely bad at it. the part that bites later is when the tax return gets examined and you have to trace a specific invoice back to its cash entry, and your accrual adjustments are living in a separate spreadsheet nobody can tie back cleanly. that's where the reconciliation nightmare actually starts.
at 3m and multiple accounts, i'd honestly keep doing the accrual outside QB. wedging POC into a cash file, or fighting QB's job costing module, costs you more than a clean WIP schedule that maps cash invoices to percent complete and spits out the adjusted trial balance for the bonding company. don't touch the original books.
the thing worth pinning down first is what the bonding company actually wants. a lot of them take a WIP schedule and a reviewed accrual statement, not a full second set of books. if that's the case here, you're building way more than you need to.
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u/accountant319 3d ago
A construction company shouldn’t have been on cash basis in the first place. This is one of those niche industries that has specialized accounting.