In this transcript from a video by Steven J Wick & Associates PC, we explore Construction work-in-progress accounting in Fort Collins and the unique challenges that electrical contractors face when managing cash flow on new construction projects. Steve Wick discusses the complexities of billing, retention, deposits, change orders, and work-in-process accounting, highlighting how timing, cost tracking, and proper accounting practices are crucial for maintaining profitability.

To learn more about managing project finances and tracking expenses effectively, check out our detailed article on construction work-in-progress accounting in Fort Collins.

This video does not constitute legal advice, and we recommend contacting a CPA to discuss your specific situation and ensure compliance with all accounting and tax regulations.

00:00:00 – Electrical Contractor Work in Process and Retention

[Music] let’s take an electrical contractor that is working on a brand new house and they are going to wire that house get that part of the job done and then they got to build that part of the job they will come back in job to finish up other parts of that job and so work in process and maybe the contract says you can only bid x amount on on a job when it’s completed and there might be a retention involved so that if you’ve got 50 of the job done and we’ll just for ease well let’s say the

00:00:47 – Billing, Deposits, and Retention Challenges

whole job at 50 so you potentially could bid 50 but there’s a 10 retention that they’re requiring of you you could actually only bill 45 000 at that point in time and you can’t bill the rest of it until the job’s completed so those are some of the twists that you have involved and so the other way is maybe you’ve gotten deposits or you were paid for things like you say you get a thirty thousand dollar deposit for you go out and buy the product but you haven’t put it in the house yet you

00:01:19 – Excess Costs and Change Orders

haven’t done anything yet and that would be a billion in excess of costs because you haven’t earned any of that and then enough of course just change orders which are huge depending on the job those can change things a lot you know they don’t like these faucets so they change them out for another type or bathroom or electrical and all the places that we can make it a smart house those are all change orders from potentially from your original bid so those are some things that are pretty

00:01:47 – Importance of Cost Monitoring

unique to the construction industry including subcontractors [Music] you know the real issue is is like you forecast you’re gonna bit you’re gonna make this much money on a job but you weren’t watching your costs well enough and therefore horrible feeling and there’s no way to make it up if you’re done with that job you know if you think of the timeline contractors okay so they’ll they’ll bill all of their stuff by the 20th of the month and then hopefully get paid in the

00:02:26 – Payment Timeline and Accumulated Expenses

10th of the following month they will have from the 21st of the month through the 20th of the following month all those expenses have built up until they can actually bill it for the job sometimes it’s on the 10th by the way but then they’re not going to get paid until the following 20 days out so now you’re you’re at 50 days potentially of costs that you’re having to bear but you can’t get paid on it yet so things that you hopefully can do depending upon the jobs but but that’s

00:02:57 – Cash Flow is King

one of those timing things that and cash flow is king within a business and so if you’re growing really really fast it is hard to make those turns there’s a counting cycle between doing the job getting the money in so you can put it to the next job [Music] you

Conclusion: Construction Work-in-Progress Accounting in Fort Collins

Properly managing work-in-progress accounting is essential for electrical contractors and other construction professionals in Fort Collins. By understanding billing schedules, retention policies, deposits, and change orders, contractors can maintain healthy cash flow, avoid cost overruns, and improve profitability. Implementing systematic accounting practices and closely monitoring project costs ensures that every job contributes positively to your bottom line. Always consult with a qualified CPA to tailor these strategies to your specific business and compliance requirements.