CONSTRUCTION REVENUE RECOGNITION.
How you recognize revenue affects your P&L, your taxes, your WIP schedule, and how banks and sureties evaluate your financial health. Most construction subcontractors don't choose their revenue recognition method deliberately, it gets set during bookkeeping setup and rarely revisited. Here is what each method means and how to know which one is right for your business.
There are two methods a subcontractor can be on, and one of them is wrong for most commercial work. Under percentage of completion, revenue is recognized proportionally as the work is completed. Under completed contract, nothing is recognized until the project is substantially complete. The second is simpler and it produces lumpy books that make bonding and banking conversations harder than they need to be. Most subs have never been asked which one they're on, which is why the answer is usually a shrug.
WHAT IT MEANS.
Revenue recognition is the accounting choice that decides when a contract's revenue hits your P&L: proportionally as work is completed under percentage of completion, or all at once at substantial completion under completed contract.
WHERE IT GOES WRONG.
Your revenue doesn't reflect the work you've done
If you're on the completed contract method, your P&L reports no revenue until a job is done, even when you've finished 80% of a 12 month project. Your books look flat while the work is happening and then spike at closeout. That makes financial management, bonding presentations, and banking conversations harder than they have to be.
You don't know which method you're using
Most subcontractors have no idea whether their books are on percentage of completion, completed contract, or something in between. If you can't answer the question, your revenue recognition is probably wrong for your business type, and your financial statements don't reflect your financial position.
Tax and GAAP treatment are different
Your tax return may use a different revenue recognition method than your GAAP financial statements, and both may differ from how your WIP schedule calculates earned revenue. When the three don't line up, financial statements confuse bankers and sureties, WIP reconciliations don't work, and your CPA has a cleanup project every year.
WHAT IT LOOKS LIKE IN DOLLARS.
If a $500K job is 60% complete, $300K of revenue is recognized, regardless of what has been billed. That's the whole idea in one line: the revenue follows the work, and the billing is a separate question the WIP schedule answers.
WHICH ONE YOU SHOULD BE ON.
Under percentage of completion, revenue is recognized proportionally as work is completed. If a $500K job is 60% complete, $300K of revenue is recognized regardless of what has been billed. This method produces financial statements that reflect work performed and it's required for GAAP compliance on most commercial subcontracts. It's also what WIP reporting is built on, because earned revenue equals contract value times percent complete.
Under completed contract, no revenue is recognized until the project is substantially complete. It's simpler, and it produces lumpy revenue recognition that doesn't reflect ongoing work. It's used mainly by smaller contractors with short duration projects, where the result isn't materially different from percentage of completion. Most commercial subcontractors running multi month projects should be on percentage of completion.
SPM configures ControlQore and your books to use the correct revenue recognition method for your business type, percentage of completion for most commercial subcontractors, and maintains WIP accounts that reconcile to your financial statements. Your P&L reflects work performed. Your balance sheet balances. Your CPA and your surety see a financial picture that makes sense.
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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