Most contractors think of year-end close as just another compliance task – something the CPA needs to check off before filing taxes.
But in construction, your WIP schedules and retainage accounts are more than accounting line items. They’re a direct window into the health of your business, your cash flow, and your ability to bid on bigger jobs.
WIP Matters More Than You Might Think
Your Work-in-Progress (WIP) schedule isn’t just a spreadsheet for the accountant. It shows:
- How accurately you’re estimating jobs
- Whether projects are running ahead or behind schedule
- How much profit you’ve actually earned vs. what’s left to earn
- Jobs that are in trouble and can threaten your business
A clean WIP report helps you run the business, build bonding capacity, and strengthen lender relationships. Sloppy WIP reporting, on the other hand, can mask major problems with project delivery and introduce separate problems with outside stakeholders.
Reconciling Retainage Before Year-End
Retainage is another area that trips up contractors. Money you’ve technically earned but can’t yet access sits on your balance sheet – and if you don’t reconcile it properly, it distorts your cash position.
At year-end, make sure:
- Retainage receivable is reconciled to your contracts
- Retainage payable matches your subcontract agreements
- Retainage is factored into cash flow planning for the new year
When retainage is accurate, you know how much cash you really have to work with.
What Your WIP Is Really Telling You
Look closely at your WIP schedule. It’s not just a report – it’s a window to your operational effectiveness. It reveals:
- Overbilling: Are you using customer deposits to cover cash gaps? This isn’t bad, provided you understand it and make decisions accordingly.
- Underbilling: Are you behind on billing for work you’ve already completed? We generally never like this from a cash conversion standpoint.
- Delivery issues: Do you have a major project that’s about to blow by target profitability and wreck your earnings for this year and maybe next?
- Job Costing and Estimating Accuracy: Are your administrative, managerial and accounting workflows mature enough to be an asset in the management of your business?
These are tough questions, but the answers tell you whether your business is built for growth or just treading water.
This is also where a fractional accounting team with expertise in construction can make a big difference. Instead of relying on basic bookkeeping, you get specialists who know how to set up WIP schedules, reconcile retainage, and prepare reports that bonding companies and banks actually trust.
Cash Flow, Credit Access, and Growth
Clean WIP and retainage reporting directly impact:
- Bonding capacity: Sureties rely on accurate financials to increase limits.
- Banking relationships: Lenders want confidence in how you manage working capital.
- Strategic planning: You can see which jobs fuel growth and which drain it.
For many contractors, this is the point where they turn to outsourced accounting for construction companies – because stronger financials translate directly into bigger opportunities.
Set the Stage for Next Year
Don’t treat year-end close like a box to check. Use it to get your WIP and retainage right, so you can step into the new year with clarity, confidence, and cash flow under control.
Book a free Cash Gap & Profitability Strategy Call to see how your construction firm stacks up – and where tightening up WIP and retainage could unlock bigger opportunities.
James Wheeler
https://www.linkedin.com/in/jamesdavidwheeler/James Wheeler is the founder of kept.pro, where he helps business owners design accounting systems that create clarity and confidence in decision-making. Over more than 15 years in executive financial leadership roles across service and technology companies, James has focused on making finance a true strategic function rather than a reporting burden. He was twice a finalist for the San Diego Business Journal CFO of the Year and has served on several nonprofit and for-profit boards over the past decade. James earned both his BA in Economics and MBA from the University of California, San Diego, where he received multiple graduate fellowships, and later completed executive education at MIT Sloan.
