PERCENTAGE OF COMPLETION METHOD EXPLAINED.
The percentage of completion method recognizes revenue and gross profit as work progresses on a contract, not when cash is collected and not when the job closes. Most commercial subcontractors use it because it matches revenue to the period the work was performed. The critical variable is percent complete, calculated by dividing costs incurred to date by total estimated cost. If that estimate is stale, everything downstream is wrong.
Revenue recognition under this method follows the work, not the billing. If a $1.2M job is 35% complete at month end, you recognize $420K in revenue for that period regardless of what you've billed or collected. The WIP schedule then reconciles recognized revenue against actual billings to produce the over and underbilling position for the balance sheet. Everything in that chain rests on one number, total estimated cost, and that's the number most subcontractors stop updating the week the job starts running.
WHAT IT MEANS.
The percentage of completion method is an accounting method that recognizes revenue and gross profit in proportion to how much of a contract is complete, not when cash is collected and not when the job closes.
The arithmetic is three lines. Percent complete equals costs incurred to date divided by total estimated costs, times 100. Recognized revenue equals contract value times percent complete. Recognized gross profit equals contract value minus total estimated costs, times percent complete.
WHY THE NUMBER COMES OUT WRONG.
Stale total estimated cost
The job started at $720K estimated cost. Labor has been running hot. The current cost to complete is $800K, but nobody updated the estimate. The denominator is wrong, so the percentage is wrong, so the recognized revenue is wrong. The job reads 40% complete when it's really 36%, and the difference gets recognized as profit that doesn't exist.
Costs not posted to the job timely
AP invoices sit in the inbox for two weeks before they're posted. Timesheets get entered monthly instead of weekly. If costs aren't in the system, the numerator is understated, which overstates percent complete and overstates recognized revenue. That's overbilling that's not real, and it reverses at closeout.
Percent complete estimated from billing, not cost
Using billing percentage as a proxy for completion percentage is backwards. You billed 40% because that's what the schedule of values allowed, and the crew may be nowhere near 40% done. Overbilled jobs read further along than they're and underbilled jobs read behind. The WIP is wrong in both directions at the same time.
WHAT IT LOOKS LIKE IN DOLLARS.
A $900K electrical contract with total estimated cost of $720K, a 20% gross margin. At month end, $288K in costs have been incurred. Percent complete is $288K divided by $720K, or 40%. Recognized revenue is $900K times 40%, or $360K. Recognized gross profit is $900K minus $720K, times 40%, or $72K. If you billed $320K, you're underbilled by $40K, and that sits on the balance sheet as a contract asset.
Job A is a $900K contract, $720K estimated cost, $288K of cost to date, 40% complete, $360K of revenue recognized, $320K billed, and $40K underbilled. Job B is a $1.4M contract, $1.1M estimated cost, $770K of cost to date, 70% complete, $980K recognized, $1.05M billed, and $70K overbilled. Job C is a $600K contract, $480K estimated cost, $96K of cost to date, 20% complete, $120K recognized, $118K billed, and $2K underbilled.
WHERE THE METHOD BECOMES A DOCUMENT.
The WIP schedule reconciles every active job's percent complete against its billed amount. It's the document that turns percentage of completion accounting into something a banker, a bonding agent, or a buyer can evaluate. Jobs that are overbilled sit as a liability and jobs that are underbilled sit as an asset, and the net position answers one question: is reported revenue backed by work performed.
THE OUTPUTS, NAMED.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing, no payroll, and no add-ons.
| Last 12 months revenue | Monthly fee |
|---|---|
| Up to $1M | $1,900 to $2,900 |
| $1M to $3.5M | $2,600 to $3,900 |
| $3.5M to $6.5M | $3,800 to $5,700 |
| $6.5M to $9.5M | $5,100 to $7,100 |
| $9.5M to $12.5M | $6,100 to $8,500 |
| $12.5M to $15.5M | $7,400 to $11,000 |
| $15.5M to $18.5M | $9,400 to $13,500 |
| $18.5M+ | Quoted individually |
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions rather than a report.
Your bookkeeper keeps doing the books.
You stop touching the books.
Everything in Core, and we run the bookkeeping and the controllership as well. Nobody in your office is answering coding questions or chasing a reconciliation at month end.
We do the books. No payroll.
Every job shows its margin while it's still running.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the job costing.
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