Construction accounts become confusing when invoices, progress certificates and cash receipts are treated as the same event. Track each project separately and distinguish what has been earned, billed and collected.
Maintain a project ledger
Assign customer claims, subcontractor bills, materials, plant hire and direct labour to the right job. This allows management to compare budget, actual spending and outstanding work.
Separate progress claims from collections
A progress certificate, invoice, retention deduction and bank receipt may happen on different dates. Keep supporting documents and recognise revenue and receivables using the applicable accounting policy rather than just bank inflows.
Monitor retention and performance security
Retention monies and performance bonds do not always have the same accounting treatment. Record contract terms, expected release dates, approvals and amounts separately instead of hiding them within general trade debtors.
Prepare for year-end estimates
Review incomplete projects, approved variations, unbilled work, disputed claims and costs to complete. Material estimates should be supported by project teams and appropriate financial-reporting judgement.
Practical example
A contractor issues a RM100,000 progress claim but receives less because part is held as retention. The unpaid portion needs proper tracking; it should not automatically disappear from the project ledger.
Your practical checklist
- Use a separate cost code or ledger for each job
- Keep certificates, invoices and receipts together
- Track retention release conditions by contract
- Review variation orders and work in progress at year-end
Frequently asked question
Is retention the same as a bad debt?
No. Retention often follows contract terms and release conditions, while a doubtful debt is assessed on recoverability.
General information only. Requirements depend on your circumstances and may change. Regulated tax-agent, audit, legal or liquidation work is handled by appropriately qualified professionals.