Accurate Job Schedules Add Value to Financial Reporting

When many contractors read the term “financial reporting,” they may naturally think of their financial statements. However, another important aspect of financial reporting is the regular and consistent handling of job schedules. Careful and detail-oriented accounting work is necessary to keep yours as timely and accurate as possible.

3 typical schedules

There are generally three supporting schedules used in association with a construction company’s financial statements:

  1. Contracts Completed. On this job schedule, a construction company tracks its jobs completed during the statement year. To ensure consistent financial reporting, only those revenues attributed to the current year on this schedule should appear in your company’s income statement as revenues for the current year.

The Contracts Completed schedule needs to specify jobs that spanned more than a year and that were completed during the current year. To do this, a middle portion of the schedule shows revenues and costs that were already recognized in previous years’ financial statements for projects completed in the current year.

  • Contracts in Progress. This job schedule lists all jobs in progress at the end of the year, regardless of whether they started during the year or in earlier years. Among the key features of the Contracts in Progress schedule is the portion that lists the revenues, costs, gross profit, billings to date and other data points for each project since its inception.

This is significant because the “costs and estimated earnings in excess of billings” and “billings in excess of costs and estimated earnings” columns reflect whether a project is over- or underbilled. Furthermore, the Contracts in Progress schedule can be used to verify the percentage-of-completion calculations on each job by taking the total costs incurred to date on each project and dividing by the estimated total costs on the project.

  • Earnings from Contracts. This schedule separately reports earnings, costs and gross profit from contracts completed during the year and from contracts in progress at the end of the year. Think of it as a reconciliation tool that summarizes revenues, costs and gross profit from the Contracts Completed and Contracts in Progress job schedules to verify and support the totals as displayed on your construction company’s income statement. Specifically, the earnings, costs and gross profit numbers on it should add up to the total gross revenues, cost of revenues earned and gross profit on your income statement.

Why they matter

As you’re likely aware, job schedules are instrumental for bonding purposes. Sureties need to be comfortable that a construction company’s management has reasonable and accurate estimating abilities. They don’t like to see significant profit fade or gain, and substantial costs in excess of billed amounts are typically regarded as red flags that will raise questions and could jeopardize your bonding capacity.

The key to success here is strong internal processes that ensure that job schedules are reconciled monthly to the general ledger. It’s also important to maintain supporting job reports using up-to-date job costing software.

Naturally, job schedules are only worthwhile if the information on them is accurate. So, establishing additional procedures — such as monthly meetings with project managers — is a good way to ensure captured information is indeed accurate and reasonable. Job schedules are estimate-driven; if project managers aren’t providing realistic data to your accounting department or system, these job schedules won’t portray the end results ultimately realized on completion.

In addition, there are ways to sort information on job schedules by project size and type, geographic location, and project manager. Doing so can give ownership and management better insight into which jobs are most profitable for your construction company. You’ll also be able to see which project managers tend to run jobs more profitably than others.

Every detail matters

Given the changes to the U.S. economy this year, and the ongoing challenges to the construction industry, it’s never been more important to closely monitor every detail of your construction company’s financials. We can help you refine your approach to job schedules specifically and financial reporting as a whole.

© 2020

Information provided on this web site “Site” by Thompson Greenspon is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.

Although Thompson Greenspon has made every reasonable effort to ensure that the information provided is accurate, Thompson Greenspon, and its shareholders, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. Thompson Greenspon also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.

Information contained on this Site is protected by copyright and may not be reproduced in any form without the expressed, written consent of Thompson Greenspon. All rights are reserved.

Share:

Leave a Comment





This site uses Akismet to reduce spam. Learn how your comment data is processed.