December is more than just the end of the calendar year—it is the most critical month for construction business owners to finalize their financials, eliminate errors, and prepare for tax season with confidence. The decisions you make (or postpone) in December directly affect your tax liability, cash flow clarity, and how smoothly your CPA can do their job.
From reviewing Work in Progress (WIP) and validating job costs to gathering subcontractor documentation and finalizing payroll, year-end bookkeeping in construction is detailed and time-sensitive. When handled correctly, it can save you significant time, money, and stress in the new year. When rushed or ignored, it often leads to amended returns, CPA delays, and unpleasant surprises.
In this in-depth guide, we walk through the essential year-end steps every construction company should complete—and explain why clean, well-organized books are the foundation of a confident year-end close.
1. Complete Your Final Work in Progress (WIP) Review
Your year-end Work in Progress (WIP) report is one of the most important financial reviews for construction companies. WIP ensures revenue and expenses are recognized in the correct period and that job profitability reflects economic reality—not just what has been billed or paid.
A thorough year-end WIP review helps:
- Prevent overstated or understated income
- Align financial statements with job performance
- Avoid tax issues related to improper revenue recognition
Year-end WIP checklist:
- Review each active and recently completed job for accuracy
- Confirm percent complete reflects actual job progress
- Ensure all costs are posted to the correct job and cost category
- Identify underbillings and overbillings that may require adjustments
WIP errors are one of the most common reasons construction financials need correction after year-end—making this step non-negotiable.
2. Reconcile All Bank and Credit Card Accounts
Before closing the year, every bank and credit card account must be fully reconciled through December 31. Reconciliations confirm that what appears in your books matches what actually cleared your accounts.
Be sure to:
- Reconcile all operating, savings, and trust accounts
- Reconcile every business credit card
- Investigate discrepancies or unreconciled balances
- Review uncleared or duplicate transactions
Clean reconciliations are critical because they give your CPA confidence in the numbers and prevent delays during tax preparation.
3. Review Job Costs and Profitability in Detail
December is the time to ensure your job costing data tells the full financial story of your projects.
During this review, focus on:
- Misapplied, uncategorized, or missing expenses
- Duplicate vendor bills or expenses
- Consistent use of job cost categories across projects
- Costs sitting in undeposited or suspense accounts
Accurate job costing supports tax reporting and provides insight into which jobs, crews, and cost categories are driving—or draining—profitability. This clarity directly improves estimating and pricing decisions in the year ahead.
4. Prepare Subcontractor Records for 1099 Filing
If you paid subcontractors during the year, December is the time to prepare for 1099 compliance—not January.
Before year-end, you should:
- Confirm which vendors meet 1099 reporting requirements
- Collect missing or outdated W-9 forms
- Verify legal names, addresses, and tax identification numbers
- Ensure subcontractor payments are properly categorized in QuickBooks
Proactive 1099 preparation eliminates last-minute scrambling and reduces the risk of filing errors or penalties.
5. Review Payroll and Employee Records
Payroll errors can create costly tax issues if left unresolved at year-end. December is your final opportunity to correct problems before W-2s and payroll filings are generated.
Your payroll year-end review should include:
- Verifying employee versus contractor classifications
- Reviewing wages, bonuses, reimbursements, and benefits
- Confirming payroll tax payments and filings are complete
- Preparing for accurate W-2 issuance
If you process payroll through QuickBooks, confirm that payroll accounts are reconciled and that payroll liabilities are accurate and current.
6. Clean Up Accounts Receivable and Accounts Payable
Outstanding invoices and unpaid bills impact both cash flow and the accuracy of your year-end financial statements.
Before closing the year:
- Follow up on overdue customer invoices
- Assess whether uncollectible receivables should be written off
- Review unpaid bills and accrued expenses
- Ensure expenses are recorded in the correct period
Cleaning up Accounts Receivable and Accounts Payable provides a clearer picture of your company’s true financial position going into the new year.
7. Run and Review Key Year-End Financial Reports
Before handing your books to your CPA, review these essential reports:
- Profit & Loss Statement
- Balance Sheet
- Job Profitability Reports
- Work in Progress (WIP) Schedule
This review allows you to ask questions, identify anomalies, and make corrections while details are still fresh—saving time and reducing CPA back-and-forth.
Final Thoughts
December sets the financial foundation for the year ahead. Taking the time to complete a thorough year-end checklist ensures your construction business enters January with clean, compliant, and reliable financials.
If year-end cleanup feels overwhelming or time-consuming, you don’t have to handle it alone. 24hr Bookkeeper specializes in construction bookkeeping and year-end cleanups, helping business owners close the year with clarity and confidence.
👉 Contact us today to get your books year-end ready.
