Accounting for Contractors: Your Monthly Close Checklist

1. Set a close date and collect the missing information

A monthly close is the process of checking, correcting, and finalizing your books for the month. For a contractor, it should answer more than how much cash is in the bank. You need to know which jobs are making money, what customers owe, what bills are coming due, and whether your reports reflect the work actually performed.

Good accounting for contractors depends on a repeatable process, not a last-minute push before tax season. Pick a realistic deadline, such as the tenth business day of the following month, and assign an owner to each task. Your bookkeeper cannot finish the close if field reports, vendor invoices, or job updates are still missing.

• Set deadlines for receipts, credit card details, time records, subcontractor invoices, and project manager updates.
• Collect bank, credit card, loan, and equipment financing statements.
• Gather customer billings, payment applications, signed contracts, approved change orders, and retainage schedules.
• List missing documents and unresolved questions in one shared close tracker, with a responsible person and due date.
• Use a consistent month-end cutoff so activity lands in the appropriate period. Ask your accounting advisor how to handle late invoices under your reporting method.

2. Reconcile cash, credit cards, and debt

Start with the accounts that can be checked against outside records. Reconcile every bank and credit card account to its statement. A downloaded bank feed is not a reconciliation: transactions can be duplicated, omitted, or assigned to the wrong account.

Then review debt and transfers. An equipment loan payment generally includes principal and interest, which belong in different places in your books. Transfers between your own accounts should not inflate revenue or expenses. Owner contributions and withdrawals also need separate treatment from operating activity.

• Match ending bank and credit card balances to the statements and explain every reconciling item.
• Investigate old outstanding checks, deposits in transit, duplicate entries, and unexplained cash transactions.
• Match loan balances to lender records and separate principal, interest, and fees as appropriate.
• Review equipment purchases and disposals so major purchases are not automatically buried in job expenses. Confirm tax treatment with your CPA.
• Tie payroll entries to reports from your payroll provider, including outstanding payroll liabilities. Keep payroll processing with your provider.
• Clear uncategorized transactions and temporary holding accounts, or document why an item remains open.

3. Check receivables, payables, and retainage

Your accounts receivable report should show collectible customer balances, not a pile of unexplained old invoices. Review it job by job. Separate ordinary collection delays from billing errors, disputed work, missing approvals, and retainage that is not yet due.

Give accounts payable the same attention. Missing subcontractor bills can make a job look more profitable than it is. Duplicate invoices can overstate costs and lead to duplicate payments. Compare vendor statements with your records, especially for major suppliers and active subcontractors.

Track customer retainage separately from amounts currently due, and track retainage you owe subcontractors separately from amounts currently payable. Release timing depends on contract terms and project status; confirm legal questions about payment rights or obligations with your attorney.

• Assign a collection action, responsible person, and follow-up date to overdue customer balances.
• Confirm payment applications were submitted correctly and accepted for review.
• Apply customer payments and vendor credits to the correct invoices.
• Identify completed work or delivered materials that have not yet been invoiced to you; record needed adjustments under your reporting method.
• Review customer deposits and advance billings so they are not automatically treated as earned revenue.
• Reconcile receivable, payable, and retainage schedules to the corresponding general ledger balances.

4. Validate job costs and update work in progress

This is where a contractor’s close goes beyond routine bookkeeping. A clean bank reconciliation will not tell you whether labor went to the wrong project or a roofing job is missing its final material invoice. Review active jobs with the people managing the work.

Check labor, materials, subcontractors, equipment, and other direct costs against the job budget. Apply labor burden and shared costs consistently under your established costing policy. If costs are allocated differently every month, margin comparisons become unreliable.

For contractors using work-in-progress reporting, update the WIP schedule with current contract values, costs to date, estimated costs to complete, and billings. Under a cost-to-cost approach, estimated total costs affect measured progress and revenue. A stale estimate can make an unfavorable job look healthy. Confirm the appropriate financial reporting and revenue recognition approach with your accounting advisor; confirm tax treatment with your CPA.

• Move costs assigned to the wrong job or cost code and investigate costs with no job assignment.
• Review labor hours, purchase commitments, and remaining subcontractor obligations against the remaining budget.
• Update estimated costs to complete using project manager input, not just the original estimate minus spending.
• Separate approved change orders from pending or disputed changes. Do not assume unsigned extras will be collected.
• Investigate overbillings and underbillings. Billing ahead is not automatically profit, and underbilling is not automatically a collection problem.
• Reconcile WIP-related balances and adjustments to the general ledger, and review completed jobs for trailing costs.

5. Review the reports and turn findings into decisions

Once reconciliations and adjustments are complete, review the balance sheet, profit and loss statement, job profitability report, receivable and payable aging, and WIP schedule together. No single report tells the whole story. A profitable month can still leave you short of cash if collections lag or debt payments are heavy.

Compare results with your budget, the prior month, and year to date. Look for explanations rather than a favorable bottom line. Did gross margin improve because production improved, or because subcontractor bills are missing? Did overhead rise because of a one-time repair, or because your ongoing cost structure changed?

• Identify jobs with shrinking margins and decide who will address pricing, production, purchasing, or scope issues.
• Update your short-term cash forecast using expected collection dates, payroll funding needs, vendor payments, debt payments, and other known obligations.
• Write a short close summary covering major adjustments, unresolved estimates, cash concerns, and owner decisions.
• Have the owner or designated reviewer approve the report package before marking the month closed.
• Restrict changes to closed periods. If a correction is needed, document it and assess whether reports must be reissued.

When to get help

Get support when the close repeatedly runs late, balance sheet accounts remain unexplained, or job margins change sharply after bills finally arrive. The same applies when your bookkeeper, project managers, and owner are working from different numbers. Those are process gaps worth fixing before you rely on the reports for major decisions.

Contractor Plus Books provides accounting and fractional CFO support for established contractors. It is not a CPA firm and does not process payroll. Tax questions should go to your CPA, and legal questions to your attorney.

A 20-minute financial review can help you see where your numbers stand, which parts of the monthly close are working, and where missing information may be affecting decisions. It is a practical starting point, whether you need outside support or a clearer checklist for your current team.