Does your software support Percentage of Completion?

Yes Seradex offers extensive support for companies that required Percentage of Completion functionality.

What is Percentage Of Completion?

Percentage of Completion is based on ratio of the accumulated job cost relative to total estimated cost. This cost-to-cost ratio determines revenues earned to date, which when charged for costs, yields job profit for the period. The Work in Process or WIP Schedule lists individual job billings, revenue recognized to date, estimated cost to complete, actual costs, percent complete and profits. Percentage of Completion Accounting benefits project based companies by recognizing equity and earned revenues on jobs in progress. This equity is recognized in the current asset account Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts. A company's working capital is decreased by the current liability account Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts.

The Percentage Of Completion method is appropriate when:

A high level of certainty exists regarding expected cash flows
A reliable basis exists for determining the percentage completed at the end of the accounting period


Why use Percentage Of Completion?

Companies that deliver contracts that take several months or longer to complete need to use Percentage Of Completion for Revenue Recognition and Inventory Valuation. This approach will ensure that you can plan for profits, control those plans, and measure the results.

Percentage Of Completion provides the best measure of operating results in terms of revenues, costs, expenses, and profits. Bankers will often require statements based on Percentage of Completion Financial Statements, supported by Completed and In-Progress Job Schedules. Strong Estimating abilities are also critical. What is current GAAP for project based companies?

Under GAAP, there are two methods of accounting for income on long-term contracts:

The Completed Contract Method"
The Percent of Completion method

In the Percent of Completion method, revenues, expenses, and gross profit are recorded each accounting period as described above. When the estimates of costs to complete and the percent complete are considered dependable, the percentage of completion method is preferred because it recognizes that the earnings process is continuous.

For more information see the Job Costing Module: