A construction company can be busy all year and still finish with nothing to show for it. The cause is usually the same: profit is earned or lost on individual jobs, while the books show only the year as a whole. Our work with general contractors, remodelers and single-trade businesses such as plumbing, HVAC, electrical and painting begins by making the results of each job visible.
Which of my jobs are actually profitable?
Job costing answers that question. Every hour of labor, every material purchase and every subcontractor invoice is assigned to the job it belongs to and compared with the original estimate. Done well, job costing also informs future bids, because you learn which kinds of work you price accurately and which you underprice.
The single-trade contractor in our case study illustrates the point. Before the engagement, the owner had no reliable view of profit by project. We set up job costing for every project, reviewed each job at each stage and advised the owner on changes that could recover a job that was slipping. The result was a business that understood where its profit came from.
What is a WIP schedule, and why does my lender want one?
A work-in-progress schedule compares what you have billed on each open job with what you have actually earned. For example, take a $400,000 contract with an estimated cost of $320,000. If you have spent $160,000, the job is 50 percent complete and you have earned $200,000 of revenue. If you have billed $230,000, you are overbilled by $30,000. That cash is welcome, but it belongs to work you have yet to perform.
Overbillings are a liability, and underbillings represent revenue you have earned but not yet invoiced. A monthly WIP schedule identifies both. It also reveals fade, the gradual shrinking of a job’s estimated margin as the work progresses, which is often the earliest sign that a project is in trouble. Sureties, the companies that issue your bonds, and banks review the WIP schedule closely because it shows how well a contractor manages its jobs.
How does retainage affect cash flow?
Many contracts withhold a portion of each progress payment, known as retainage, until the work is accepted. In the example above, if the contract holds back 10 percent, $23,000 of the $230,000 billed remains with the owner or general contractor. Across several open jobs, retainage can add up to the equivalent of a payroll or two.
We record retainage as a separate receivable for each job, show when each amount should be released and build it into your cash flow forecast. That way a delayed release does not catch you off guard, and no amount owed to you is overlooked once a job closes.
How are contractors taxed on long-term jobs and equipment?
Larger contractors generally must report long-term contracts using the percentage-of-completion method, which recognizes income as the work progresses rather than when the job is finished. Smaller contractors are often exempt for contracts expected to be completed within two years. According to the Form 8697 instructions, the exception applied to contractors with average annual gross receipts of $31 million or less over the prior three years for contracts entered into in 2025, a threshold adjusted for inflation each year. The 2025 tax law also changed the rules for residential construction contracts entered into after July 4, 2025.
Equipment is the other significant lever. For 2026, the Section 179 expensing limit is $2,560,000, reduced once qualifying purchases exceed $4,090,000, per Revenue Procedure 2025-32, and 100 percent bonus depreciation applies to qualifying property acquired after January 19, 2025. A large immediate write-off can be the right decision. If the truck or excavator is financed and your lender expects strong reported profit, however, a slower depreciation schedule may serve you better. We model both approaches before year-end.
How does SBA CPA work with contractors?
We keep your books by job, prepare a monthly WIP schedule, track retainage and run payroll for field and office staff through Payroll Plus, including the year-end Forms 1099 for your subcontractors. Our virtual CFO service adds cash flow forecasting and bid analysis for owners who want to grow without overextending the company. An introductory call with our client services team is a straightforward first step.