End Of Year Construction Accounting Checklist

As the calendar closes, construction accounting teams face one of the most important periods of the year. End of year accounting is not just about closing the books. It is about setting your business up for clearer financial visibility, stronger compliance and a smoother start to the year ahead.

Construction companies face unique challenges that make year end more complex than other industries. Long term projects, retainage, work in progress and cost allocations all require careful review. A thoughtful close helps leadership trust the numbers and make confident decisions moving forward.

Why year end accounting matters in construction

Unlike many businesses, construction revenue and expenses do not align neatly with the calendar year. Projects span months or years, change orders evolve over time and costs continue to flow long after invoices are issued.

A strong year end process helps you:

• Ensure revenue is recognized accurately
• Validate job profitability by project
• Reduce surprises during tax season
• Provide leadership with reliable financial insights

When accounting data is clean and current, teams can focus less on reconciling the past and more on planning for growth.

Review work in progress carefully

Work in progress, or WIP, is one of the most critical elements of construction accounting. An inaccurate WIP schedule can distort financial statements and misrepresent company performance.

At year end, review each active project and confirm:

• Percentage complete is supported by actual costs incurred compared to total estimated costs
• Revenue recognition aligns with the cost to cost method where applicable
• Costs incurred are accurate, complete and properly classified
• Remaining cost estimates reflect current scope, approved change orders and known risks
• Overbillings and underbillings are properly recorded and supported

Grounding WIP calculations in verifiable cost data helps ensure financial statements accurately reflect project performance as you close the year.

Reconcile job costs and budgets

Year end is the right time to ensure job costs are fully captured and aligned with approved budgets. Missing costs or misclassified expenses can impact both project margins and overall financial health.

Key steps include:

• Reviewing open commitments and purchase orders
• Posting all vendor invoices and payroll costs
• Confirming cost codes are applied correctly
• Reviewing change orders for proper approval and inclusion

Accurate job cost data allows project managers and executives to trust historical performance and forecast future work more confidently.

Address retainage and accounts receivable

Retainage can create cash flow blind spots if not managed carefully. At year end, review all outstanding retainage balances and confirm they align with contract terms and billing schedules.

You should also:

• Verify retainage held and retainage receivable are recorded correctly by project
• Confirm expected release timelines based on substantial and final completion milestones
• Follow up on aged receivables and resolve disputed invoices
• Evaluate collectability before writing off any balances

Accurately tracking retainage and receivables improves balance sheet reliability and provides a clearer view of cash flow heading into the new year.

Prepare for taxes and compliance

Construction companies often deal with complex tax and compliance considerations including revenue recognition methods, retainage reporting and multi jurisdiction work. A clean year end close supports smoother collaboration with your CPA and auditors.

Before closing the year:

• Confirm depreciation schedules and fixed asset records are up to date
• Review subcontractor compliance and prepare accurate 1099 data
• Validate that revenue recognition methods are applied consistently and supported by documentation
• Organize contracts, change orders, billing records and WIP support schedules

Strong documentation and consistency reduce audit risk and prevent last minute issues during tax preparation.

Leverage software to simplify the close

Modern construction accounting software can significantly reduce the manual effort involved in year end processes. Having project financials, WIP, billing and accounting data connected in one system minimizes errors and improves visibility.

When teams use integrated platforms, they spend less time reconciling spreadsheets and more time analyzing results and planning ahead.

Start the new year with confidence

End of year construction accounting is about more than compliance. It is about clarity. When your books are accurate and your data is reliable, leadership can make smarter decisions about staffing, bidding and growth in the year ahead.

A structured year end process turns accounting into a strategic advantage and sets the foundation for a stronger, more profitable construction business.

When your year end close depends on accurate WIP, clean job costs and reliable billing data, disconnected systems create unnecessary risk. RedTeam brings project and financial data together in one connected platform, helping construction teams maintain consistent WIP reporting, improve visibility across jobs and close the year with confidence.