The construction industry thrives on tight deadlines, precise budgets, and detailed reporting. As the year comes to a close, many contractors face three critical challenges: reconciling open projects, closing out accounts, and ensuring that every cost is properly tracked.
At DeMera DeMera Cameron, we have partnered with Central Valley construction companies for decades. One lesson stands out above all others: accurate job costing and thorough year-end close-outs. They are essential to profitability, compliance, and long-term success.
Why Job-Costing Accuracy Matters
Construction accounting is unlike most other industries. Instead of simple sales and expense flows, construction projects are often long-term, involve multiple stakeholders, and span across different job sites. This complexity makes job project budget accuracy essential.
Accurate job costing ensures that:
- You know the true cost of labor, materials, subcontractors, and overhead
- Profits are not overstated or understated
- Financial reports are audit-ready and compliant
- Project overruns are caught early before they erode margins
When job costing is inaccurate, companies risk losing sight of project profitability, misallocating overhead, and scrambling during tax season to correct costly errors.
Common Pitfalls to Avoid
Construction firms that leave close-out tasks to the last minute often fall into predictable, avoidable issues.
- Misallocated Overhead: Spreading overhead inaccurately across projects makes it difficult to see true profitability.
- Unbilled Extras: Missed change orders or overlooked billable costs result in lost revenue.
- Poor Time Tracking: Outdated and/or manual time tracking systems create inaccuracies in labor costs.
- Delayed Close-Outs: Waiting until tax season to reconcile jobs creates errors, missed deductions, and unnecessary stress.
Avoiding these pitfalls saves your business money and creates financial confidence, giving management a clear view of business health.
Tools and Technology for Accuracy
Today’s accounting and construction management software makes accurate job costing and close-outs much easier. The most effective systems allow you to:
- Integrate field data directly into accounting records
- Automate WIP and job cost reports
- Track labor, materials, and equipment by project in real time
- Manage retainage and change orders seamlessly
Cloud-based solutions also ensure that project managers and accountants see the same data in real time, reducing errors caused by miscommunication or siloed information.
Tax Implications of Year-End Close-Out
Year-end close-outs are strictly about accuracy and maximizing tax savings.
- Revenue Recognition: Properly matching costs with revenue prevents overstating income.
- Depreciation and Capitalization: Classifying equipment purchases correctly can maximize deductions.
- Section 179 and Bonus Depreciation: Using these provisions can significantly reduce taxable income.
Reconciling projects before year-end ensures you enter tax season with clarity, accuracy, and confidence.
Action Plan for Central Valley Contractors
As December approaches, here are practical steps every Central Valley construction company should take before December 31:
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Finalize All Change Orders
Unapproved or undocumented change orders can distort financial results. Every change in scope should be documented, billed, and approved before the project is closed.
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Review Retainage Balances
Retainage receivables often accumulate across multiple projects. Before year-end, verify all amounts due, collect what you can, and reconcile retainage accounts.
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Reconcile Work-in-Progress (WIP) Reports
Compare estimated costs to actuals. Identify over-billed and under-billed projects, then make necessary adjustments to ensure revenue recognition is accurate.
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Audit Job Cost Ledgers
Go line by line to confirm that every expense,: whether it’s materials, subcontractor invoices, or labor hours, is organized or coded to the correct job. Small errors here can have significant consequences later.
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Address Punch-List Items
Unfinished tasks may seem minor, but they often delay final payments. Completing punch-list items quickly accelerates cash flow and improves client satisfaction.
The most important step to take is scheduling a year-end review with your CPA to maximize deductions and avoid surprises.
The Bottom Line
Year-end project close-outs and job-costing accuracy may not feel as urgent as completing a pour or winning the next bid, but they are just as vital to long-term success.
At DeMera DeMera Cameron, we have spent decades supporting construction companies across the Central Valley. From WIP schedules to job-costing systems and tax strategies, our team ensures your projects are not only built well but also accounted for with precision.
Do not let costly errors slip through the cracks.
Contact DDC today to keep your books accurate, compliant, and audit-ready.