Year-End Construction Accounting Tips for Contractors in 2025

As the year winds down, contractors are focused on wrapping up projects, finalizing financials, and planning for the year ahead. While it’s tempting to focus only on the next job or project pipeline, taking time to review your books, processes, and strategy can set your business up for smoother operations and stronger profitability in the coming year.

Here are key areas every construction business should focus on as 2025 comes to a close.

1. Reconcile Job Costs and WIP Reports

Before you close the books for the year, make sure your job costing and work in progress (WIP) reports accurately reflect your projects’ true performance. Review each job’s revenue, cost, and profit status to ensure:

• Change orders and retainage are properly billed and recorded
• Labor and materials costs are fully captured
• Over/under billings are accurate and properly reflected in your financials

Accurate WIP reporting not only supports your financial statements—it helps you start the new year with clear insight into which jobs are driving profit and which need tighter cost control. When you use a construction accounting system, like Deltek ComputerEase, you can integrate job costing, billing, and accounting so you can easily generate real-time WIP and financial reports without manual reconciliation.

2. Review and Adjust Budgets for 2026

Now’s the time to analyze your 2025 performance and adjust next year’s budgets. Consider:

• Rising material and labor costs
• New technology or software investments
• Expansion plans or additional crews

If you track overhead and job costs separately, review where your indirect expenses increased and build those insights into your 2026 pricing strategy. Smart budgeting now can help you avoid margin erosion later.

3. Evaluate Cash Flow and Retainage

Cash flow is the lifeblood of every construction company. As projects wrap up for the year, check on outstanding invoices, retainage balances, and payment timelines.

Ask yourself:

• Are your billing and collection processes as efficient as they could be?
• Are you waiting on retainage that should have been released?
• Can you improve payment terms or implement electronic billing in 2026?

Improving your cash position now helps you start the new year with stability and more flexibility to invest in new opportunities.

4. Conduct an Equipment and Inventory Audit

If your company maintains vehicles, heavy equipment, large tool inventories, or keeps stock of commonly used materials, make time for a year-end audit. This includes not just equipment, but also everyday materials and any excess stock that returns from job sites. Updating these lists helps you track what you already have on hand, avoid unnecessary purchases, and reuse materials on future projects.

Record maintenance costs, document quantities, and identify underutilized assets or surplus materials that could be sold, returned, or repurposed. A clean and accurate asset and material record supports your balance sheet and can inform smarter purchasing, fleet planning, and job costing decisions.

5. Prepare for Tax Season Early

Tax season comes quickly after the new year. Review your fixed assets, depreciation schedules, and any recent purchases that may qualify for deductions. If your company uses percentage-of-completion accounting, ensure all documentation is accurate and current.

It’s also a good time to meet with your CPA to discuss:

• Any upcoming tax law changes
• State and local compliance requirements
• Strategies to minimize tax liability

A construction-focused CPA can help you navigate the nuances of retainage, progress billing, and contract-based accounting under ASC 606.

6. Invest in Technology for Greater Efficiency

Heading into 2026, many contractors are investing in technology to automate manual processes and improve project visibility. From field time tracking and document management to job costing automation, technology can help reduce overhead and improve accuracy across departments.

If you’re still working in spreadsheets or generic accounting tools, now is the perfect time to explore a purpose-built construction accounting solution—one that connects the field and office, improves reporting accuracy, and helps your team make better, faster decisions.

7. Set Goals and KPIs for the New Year

Finally, use your year-end data to set measurable goals for 2026. Identify which metrics—such as gross margin per job, days sales outstanding (DSO), or field productivity—had the greatest impact on your success, and track them monthly in the new year.

Data-driven goals not only help you measure progress but also align your office and field teams around shared priorities.

Start 2026 with Confidence

Closing out the year isn’t just about balancing the books—it’s about building a stronger basis for the future. By reviewing your performance, tightening financial processes, and adopting the right technology, your construction business can move into 2026 with confidence, clarity, and control.