What's considered a closed project can vary. Typically, when the project is substantially complete with all costs incurred, and no billings remain (including retainage), the project is considered closed. Thus, whether or not you have collected those billings doesn't necessarily matter.
We all know there's no clean cut off here. All costs are incurred but there are some punch list items that haven't been addressed. You are permitted to close the project for financial statement purposes so long as additional punch list costs are not substantial in relation to total costs. For example, it's common to see a closed job by 12/31/22, have additional costs in 2023. We just hope it's nothing significant.
You may have a different definition for closed. Some companies consider a job closed after the final bill has been collected. For you that job is open. However, for financial statement purposes you would have zero work in progress. All costs are incurred and the total contract price has been billed, leading to no over/under billings. There should be good reason to leave such a job open at year end. You may be working through a change order or negotiating close out, which could lead to re-work, future commitments, etc. In that case, you can leave that project "open" but leave notes behind as to why you're considering it open and discuss it with your CPA. Some adjustments may be necessary.
As always, if you have any questions please don't hesitate to reach out!
-Ara
Comments