6 Reasons Construction Companies Need an Accountant Who Understands WIP
Sam's List Editorial | 2026-06-23
6 Reasons Construction Companies Need an Accountant Who Understands WIP A contractor can be busy, profitable on paper, and one job away from running out of cash. That gap usually traces back to one document most general-purpose accountants never build correctly: the work-in-progress schedule. If your accountant can't produce a clean construction accountant WIP schedule, they're not doing your books wrong by accident. They're doing them the way they were trained to — for businesses that sell a thing and collect the money. Construction doesn't work like that. You bill ahead of work, fall behind on work you've already done, and carry retainage for months after the punch list is signed. Here's what that actually means: your financial statements are only as honest as your WIP. And the WIP is only as good as the person building it. Here are six reasons that person needs to know construction cold. 1. Cash-basis books quietly lie about every job's profit Most small contractors start on cash basis because their first accountant set it up that way. It's simple. It's also useless for telling you whether a job made money. Under GAAP, construction contracts are recognized over time — what most people still call percentage-of-completion accounting. ASC 606 measures progress using an input method, most often cost-to-cost: the share of total estimated cost you've already incurred is the share of revenue you book. Spend 40% of the budget, recognize 40% of the contract. Cash basis ignores all of that. It records revenue when the check clears and cost when you pay the bill, which are almost never the same month as the work. A job can look wildly profitable in March and underwater in May purely because of when invoices landed. You can't price your next bid off numbers that swing for reasons unrelated to the actual work. 2. Tax law may force percentage-of-completion on you anyway This isn't just a GAAP preference. For tax, IRC §460 generally requires the percentage-of-completion method for long-term contracts — defined as contracts not completed within the same tax year they're started. There's a meaningful carve-out. The small-contractor exception lets you skip §460's required method if your average annual gross receipts for the prior three years fall under an inflation-adjusted threshold (the 2025 figure was $31 million) and the contract is expected to finish within two years. Recent legislation also expanded relief for certain residential contracts. The threshold moves, and the rules around it have shifted in the last couple of years. That's exactly the problem. Whether...
