Construction Business Books CleanupWhere the reserve actually sits

Someone opens this page because the 10 percent is missing and the bank will not explain it. The useful split is simple. If you are the owner required to reserve the funds, you are holding money that is not yours to spend, and the row is a liability until the work is done and the reserve is released. If you are the contractor, you have earned a claim that is not cash yet, and the row is a receivable until the draw clears.

A finished building can glow after dark while its books stay a separate question from the sidewalk. We do not guess a structure's book value from the curb. We ask a plainer question of a job. Is the retainage a receivable still, or has somebody already spent it in their head and in the operating account. The lights are the feeling. The row is the work.

Putting the amount in a cost code hides it on both sides. The owner thinks the cash is still reserved because the bank is high. The contractor thinks the job is fatter than the draws. Neither glance survives a tie out. The row is the correction, and it is boring on purpose.

A contract to build that is not finished in the tax year it was signed is the usual shape of a long job. Many of those jobs are read as they go, for the statements a lender wants, and on a different clock for the return. The steps of that method stay in the working file. Whatever method the file is on, the hold is still a row. Percentage of completion does not make retainage into cash. Completed contract does not make a missing receivable into a mystery that can wait.

Change orders belong on the same job, with their own status. An approved change that has not been billed is not income. A billed change that the owner is holding a slice of is another receivable, or a larger one. Mixing them into a single revenue number is how a job looks done while the field is still buying materials.

Overbilling and underbilling are the names people use when the bill and the cost are out of step. We would rather show you the bill, the cost, the deposit, and the hold as four lines than hand you a single percent that hides which line is wrong. The four lines are something an owner can argue with. A single percent is something an owner has to trust, and trust is how the draw became a surprise.

The reserve for each open job is named. The bank account that holds an owner's reserve is named, if the money was actually segregated, and it is described honestly if the money was not segregated and exists only as a row. The draws that cleared are matched to deposits. The draws that did not clear are still requests, with dates.

From that picture a person can decide whether to take money home, whether a sub can be paid without starving the next job, and whether October still has room to change the year. A row that lets you decide those three things has done its job. It is not a trophy. It is a way to sleep.

If your file cannot produce those four lines yet, the cleanup is the work of building them from the statements, the job list, and the invoices that never got the job's name. The draw page shows the order. The clock page shows the dates that sit on top of the row once it exists.