Billing and payment do not establish earned profit
For long contracts, progress, invoicing and cash receipts can occur at different times. Assess the applicable accounting treatment from the contract and actual progress, rather than using advances or issued invoices alone.
Update expected completion costs
Delays, price increases and remedial work can make the original budget obsolete. Ask project managers what work remains and how it is costed. Extra work is not automatically an enforceable customer claim; keep approvals and correspondence.
Reconcile each material project
Record contract value, costs incurred, costs to complete, invoices, receipts and uncertainties. Explain differences between internal project rates and actual ledger costs. A profitable portfolio must not hide an expected loss on one project. Record when new information became available and what mitigating action remains possible.
Source and background: Onderhanden projecten in de jaarrekening.
