Don’t Let Stale POC Calculations Skew Your Financials

Percentage-of-completion (POC) accounting is a common and effective method in construction accounting. When done right, it aligns revenue and costs across the project lifecycle, giving a clearer view of income statements and overall profitability. But here’s the catch: POC only works if your numbers stay fresh.

And that’s where many contractors go wrong.

The Problem: Set It and Forget It

One of the most frequent pitfalls we see is the “set it and forget it” approach. Contractors often establish a POC method early on but fail to revisit it regularly. Whether it’s due to project delays, shifts in material costs, or just the overwhelming day-to-day demands of running a small business, cost-to-complete estimates can quickly become outdated.

That’s when the risks start stacking up. Inaccurate financial data—like overstated revenue, incomplete balance sheets, or misaligned WIP schedules—can mislead owners, lenders, bonding agents, and even your own team.

And let’s not forget the potential tax help headaches: inaccurate POC data may lead to overpaid taxes or underreported income, drawing unnecessary IRS attention.

Red Flags to Watch For

If any of these sound familiar, it might be time to dig into your numbers:

• Stale cost estimates that haven’t been updated in months
• Lack of communication between project managers and accounting
• Billing and WIP updates not syncing
• Delays in project closeouts skewing revenue recognition

These aren’t minor bookkeeping blips—they’re systemic issues that can affect your entire financial accounting framework.

Best Practices for POC Accuracy

1. Make POC reviews a monthly ritual
   Build this into your regular payroll services and close-out process. Don’t wait until tax season.
2. Bridge the gap between jobsite and back office
   Keep project managers in sync with your accounting team. Their input is vital for accurate reporting.
3. Reconcile WIP with the general ledger
   Your WIP schedule should match your books. Discrepancies are a major red flag for auditors and lenders alike.
4. Document your assumptions
   If you’re estimating costs, capture the rationale. It makes future updates faster and improves credibility with stakeholders.
5. Work with your CPA year-round
   Don’t treat your CPA like a seasonal resource. Partnering consistently allows for real-time insights, improved financial statements, and better retirement planning strategies.

Why It Matters More Than You Think

Outdated POC numbers don’t just impact internal reporting—they can affect your access to credit, bonding capacity, and even payroll stability. And in a volatile industry with razor-thin margins, every decision counts.

POC accounting is a powerful tool—but only if it’s actively managed. If your cost-to-complete figures are outdated, so is your understanding of profitability.

Let’s Keep Your Numbers Working for You

At Rivero, Gordimer & Company, we’ve been helping construction firms, subcontractors, and small business owners make smarter decisions for over 40 years. We’re proud to work closely with major industry organizations like the Construction Financial Management Association (CFMA), Florida Surety Association (FSA), and Florida Transportation Builders’ Association (FTBA)—keeping us tuned in to the latest challenges, regulations, and best practices shaping the industry. Our team understands the nuances of tax preparation, financial reporting, and everything from payroll services to complex retirement planning strategies.

Whether you need help updating your WIP schedule, improving your balance sheet accountant processes, or making better use of your financial statements, we’re ready to assist.

Contact us today to schedule a conversation with a CPA who knows construction accounting inside and out.