FinTruction, 215 N MOORE Road APT 3024, Coppell, TX (2026)

06/17/2026

A construction defect reserve is a balance-sheet liability for warranty work that hasn’t materialized yet. It funds punch-list items, warranty repairs under contract (1-year general, 2-year systems, 10-year structural typical), and discretionary callbacks that protect referrals.

GAAP and tax diverge. GAAP accrues the reserve against completion-period profit, but tax doesn’t allow the deduction until IRC §461(h) economic performance is met (repairs performed and paid). Accrual builders pay current-year tax on full project profit with warranty deductions landing later, while cash-basis builders deduct only when paid.

Sizing matters because of this timing. On a $2M project at 12% net, you pay current-year tax on the $240K, then need another $40K to $100K of warranty cash on top. Skipping the reserve doesn’t save tax; it compresses cash risk.

Builders hold the reserve through a separate warranty escrow funded at closeout, a sub-account inside operating cash with a covenant balance, an owner distribution reduction during the warranty period, or a “warranty payable” liability tied to a cash hold.

THE FIX:
Build the reserve into your closeout SOP. Project type drives the percentage (1-3% commercial, 1-3% standard residential, 2-5% custom or coastal).

Pick a reserve mechanism. Separate escrow is cleanest but costs flexibility; sub-account works for tighter cash discipline; distribution reduction is the lever for S-corp owners.

Track callbacks against the reserve in real time. Every warranty repair, material cost, and labor hour codes to the project’s warranty line.

Release excess to retained earnings at warranty close after confirming no open issues.

Coordinate with your CPA on the tax timing. The reserve manages cash; tax savings land when repairs are paid and §461(h) is met.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/16/2026

A performance bond is a three-party agreement: you (obligee), the sub (principal), and the surety. If the sub fails, the surety either pays the loss or hires a replacement to finish. Premium runs 1-3% of contract, paid by the sub and passed through in the bid.

Bonds aren’t right for every sub. The 1-3% gets baked into the bid, which makes a $20K small-trade contract uneconomic to bond. Trade matters too: framing, roofing, HVAC, and electrical default at higher rates and sit on critical-path schedule, so bonds make sense at lower thresholds for those trades than for landscaping or finishes.

Most contractors run a menu rather than a bond mandate. Common substitutes include higher retainage (10% vs 5% on non-bonded subs), joint check agreements with the sub’s material suppliers, financial prequalification before contract award (current ratio, backlog, banking references), and SubGuard insurance (a portfolio-level policy the GC holds covering all subs).

THE FIX:
Set a bond threshold by trade. Framing, roofing, HVAC, and electrical bond at $50K and up; lower-risk trades bond at $100K or higher.

Prequalify every sub before contract award. Pull a current financial statement, backlog list, references from two recent GCs, and a banker contact. Subs that won’t share aren’t ready to be on your project.

Use higher retainage as the bond substitute. Retaining 10% on non-bonded subs (versus 5% standard) gives working capital to cover replacement on partial default.

Look at SubGuard if you run six or more major subs per year. The policy costs roughly 0.5-1% of total subbed work and covers default across all subs without individual bond friction.

Get a personal guarantee from the sub’s principal where bonds aren’t economical. It gives you legal recovery if the sub defaults.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/15/2026

DESCRIPTION:
When active, every new hire fills out a target-group screening on or before start date (veterans, SNAP recipients, ex-felons, long-term unemployed). Form 8850 goes to your state workforce agency within 28 days, the agency certifies, and you claim the credit on the business return. Standard max is $2,400 per hire; disabled-veteran tiers reach $9,600.

The credit expired December 31, 2025. State workforce agencies are still accepting Form 8850 for 2026 hires but holding certifications pending reauthorization. WOTC has lapsed before in the past decade and was retroactively reinstated, restoring credits for the gap years.

The contractors who get paid retroactively are the ones who maintain screening discipline through the hiatus. Without a Form 8850 filed inside the 28-day window, the state cannot certify even after reauthorization.

For 2025 hires properly screened at the time, the credit is still claimable on the 2025 return. Many contractors leave December-2025 credits on the table assuming the hiatus blocks them, which it doesn’t.

THE FIX:
Add WOTC screening to the new-hire intake packet. The candidate signs and dates a one-page target-group questionnaire alongside the W-4 and I-9.

File Form 8850 within 28 days of every qualifying hire’s start date, even now. The state workforce agency accepts the submission and holds certification pending reauthorization.

Log every screened hire with start date, target group, 8850 submission date, and certification status. When reauthorization happens, your accountant works from a clean list.

Review 2025 hires that were properly screened, and confirm the credit was claimed on the 2025 return. Amend if missed.

Check your payroll provider’s WOTC module. Most maintain screening through the hiatus; if yours doesn’t, turn it on.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/14/2026

Loan covenants are conditions in the loan agreement, including financial ratios you must maintain, affirmative requirements like timely financial deliverables, and negative restrictions on actions requiring lender consent.

Debt-to-equity is total liabilities over total equity (capped at 3:1), and current ratio is current assets over current liabilities (floored at 1.25). Both move every month as the business operates.

The bank checks once a year. By then the violation may have been live for months and the fix options have narrowed. Catching drift in month 4 lets you adjust spending, payment timing, or capital structure before year-end, while waiting for the review puts you in a remediation conversation.

The four remedies escalate together: calling the line forces full repayment in 30-90 days, restricting draws freezes new borrowing, default interest adds 2-5%, and additional collateral pulls more assets into the lien.

THE FIX:
Pull every covenant from the loan agreement into a tracking sheet: ratio definition, threshold, calculation source, and reporting deadline.

Calculate the ratios monthly. Each month-end produces a covenant report alongside the P&L and balance sheet, showing current level, threshold, and drift since prior month.

Set internal thresholds tighter than the covenant. If the bank requires current ratio above 1.25, target 1.40 internally. The buffer absorbs normal variation.

Alert before violation. When a ratio crosses the internal threshold, escalate to the CFO or owner the same week.

If drift continues, talk to your banker before the annual review. The same number framed as a recovery plan in month 9 is a relationship move, while sprung on the bank at review it’s a problem.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/14/2026

A job cost report tells you what happened.

It doesn't tell you what to do about it.

That gap is where most contractors are sitting without knowing it.

The numbers add up. The report looks clean.

But it can't tell you which trade ate your margin. Which job type is consistently profitable. What to bid more of.

Not because the report is wrong.

Because the cost codes underneath it are too blunt to answer.

Three usual culprits.

Codes too broad. One bucket called "Materials" hides whether it was lumber, fasteners, or finishes that blew the budget.

Codes inconsistent across jobs. The same framing work shows up under three different labels. Now you can't compare jobs.

Estimate and actuals don't match. Estimator uses 10 categories. Bookkeeper uses 50. Bid versus actual, the comparison that matters most, never reconciles.

The fix isn't a new system.

CSI MasterFormat already covers every aspect of construction in 50 divisions. Most construction software ships with it preloaded.

Tighten what you have. Keep it consistent across jobs. Match it to how you bid.

That's the difference between a job cost report and a job cost decision.

Want to know what your cost codes are hiding?

Book your free 48-hour audit from the link in bio.

If we miss the deadline, we work free for 30 days.

06/13/2026

Estimator accuracy is the variance from bid to actual. Closed-job actuals compared to the original estimate by category (labor, materials, subs, equipment, indirect) tell you where your estimating is reliable and where it’s systematically off.

A consistent 15% miss on framing labor across 10 jobs points to a systemic problem: wrong unit rates, an estimator misreading scope, or productivity assumptions out of step with how your crews work. Without the comparison, the same miss happens on the next bid.

Healthy gaps are tight. ±5% on direct costs is what experienced GCs aim for, ±10% works with room to tighten, and ±15% on a recurring category is where bid quality costs real money. Chronic under-estimating bleeds margin while chronic over-estimating loses bids.

The variance report is the closing brief from every job. Estimators use it to update unit rates, PMs use it to flag scope-vs-execution gaps, and ownership uses it to spot consistently underperforming trades. An estimating database built from 30 closed jobs beats one from vendor pricing.

THE FIX:
Build a job closeout protocol. Every completed job produces a final actuals report by cost category, forwarded to estimating within 30 days.

Run a variance report quarterly. Show estimated vs actual by category on every job closed in the period. Calculate average variance, not just one-off comparisons.

Set internal accuracy targets. ±5% on direct costs and ±10% on subs and indirects is reasonable.

Update the estimating database from variance results. Concentrated miss directions call for unit-rate adjustments, and high variance calls for a scope or productivity review.

Make estimator accuracy a named KPI alongside revenue and margin. Without that visibility, the variance report becomes a file nobody opens.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/12/2026

The imprest system is the standard for petty cash. A fixed float lives at each location, every disbursement requires a receipt, and replenishment only happens when receipts plus remaining cash equal the original float. At $300 per site, $300 should always reconcile back to $300.

For construction, each receipt needs a job code. A $40 hardware run, a $25 crew lunch, or a $60 emergency dump-run all need attribution to a specific job, or your job costing is short by that amount. Across four sites and a year, that unattributed cash distorts job-cost reporting meaningfully.

The typical failure pattern: the float runs out, someone goes to the bank, no receipts get matched, the new cash gets added to what’s left. The reconciliation step is the one that always gets skipped, and once it does, cash position becomes a mystery.

At $1,200 across four sites with no controls, the leakage shows up nowhere on the financials. Cash doesn’t trip bank reconciliations or card statements. Without the imprest discipline, nothing catches the loss.

THE FIX:
Designate one custodian per site with a fixed float in writing. The cap is $300 per site and $1,000 overall, which means four active sites either run $250 per site or three sites at $300 each.

Require a receipt for every disbursement, no exceptions. Hold receipts in a marked envelope until replenishment.

Reconcile at every replenishment. Receipts plus remaining cash must equal the original float before the bank withdrawal happens. A discrepancy triggers investigation, not a top-up.

Code each receipt to a job at the moment of disbursement. Without that, the job allocation gets lost.

Migrate small-dollar field expenses off petty cash. A per-site purchasing card with a $500 monthly limit captures the same flexibility with statement-based reconciliation.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/11/2026

The excavator was on your books at some net book value after years of depreciation. The insurer paid $74,000. The accounting move is to remove the asset at remaining book value and recognize the gain or loss for the difference.

If the gain qualifies under §1033, the contractor can defer it by reinvesting in similar or related-use property within the replacement period (generally two years). Without reinvestment or qualifying replacement, the gain is taxable in the year received.

§1245 recapture is the wrinkle. The gain up to accumulated depreciation is ordinary income, not capital. On a $74,000 payout against $20,000 book value with $40,000 of accumulated depreciation, the $54,000 gain splits into $40,000 ordinary (recapture) and $14,000 capital.

As recorded, $74,000 of phantom revenue inflates the P&L and tax, while the excavator still sits on the equipment list. A clean entry removes the asset at book value, recognizes the gain or loss, and handles the §1033 election. State conformity differs, especially in California, so review the calculation with your CPA.

THE FIX:
Build a destruction file: date of loss, claim number, settlement letter, proof of removal. Your CPA needs all of it.

Calculate accumulated depreciation and remaining book value at the disposal date. The $74,000 minus book value is the gain or loss. Accumulated depreciation determines the §1245 recapture amount.

Decide on §1033 deferral before filing. The election requires identifying replacement equipment within the replacement period (generally two years). Without it, the gain is taxable in the year received.

Book the correct entry: remove cost and accumulated depreciation from the register, debit cash, credit gain or loss for the difference. Reverse the phantom $74,000 revenue.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/10/2026

A strategic accountant talks to you four times a year, not once: March reviews last year’s return for adjustments, June projects mid-year income and resets estimates, September times depreciation and major purchases, and November locks year-end decisions on bonuses, equipment, retirement, and entity moves.

On $250,000 of profit, the $15,000 isn’t one trick. It compounds: S-corp election, Solo 401(k) at the annual contribution limit, accountable plan reimbursements, Augusta rule for short-term personal-residence rental, Section 179 timing across multi-year purchases, and QBI optimization on pass-through entities. State conformity varies on §179 and S-corp treatment, so review the stack with a CPA familiar with your state.

A filing-only accountant won’t surface these moves because they’re paid to process the return, not plan it. The information sits in conversations that don’t happen unless someone schedules them.

A filing-only accountant relationship is intake forms in February and a return signature in April, while a strategic one adds a June projection, a September check-in, and a November year-end planning meeting.

THE FIX:
Audit the cadence. Count conversations in the last 12 months not initiated by you and not tied to the return itself.

If the count is zero or one, ask for a structured year-round schedule before assuming you need a new accountant. A filer can evolve into a strategist if the engagement supports it.

If your accountant resists structured planning conversations or bills hourly for strategic questions, look for a firm that includes advisory work in the engagement.

Prepare for the November conversation with YTD financials, equipment plans, retirement contribution capacity, and life events affecting your tax position.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

06/08/2026

WIP (work-in-process) compares billed-to-date against earned-to-date on every active job. For percentage-of-completion reporters, it’s the spine of revenue recognition.

Two frameworks govern this. GAAP under ASC 606 requires PoC for long-term contracts, while tax basis allows IRC §460(e)’s small-contractor exception for contractors under the $32M 2026 gross receipts threshold (adjusts annually) whose contracts complete within two years. Most still run WIP regardless because bonding companies, banks, and internal planning require it.

A WIP schedule reads across columns: contract value, estimate at completion, costs to date, percent complete (costs ÷ EAC), earned revenue (contract × percent), billings to date, over/under. The over/under column shows whether you’ve billed ahead of work performed (overbilled, a liability) or behind (underbilled, an unbilled receivable).

Without WIP on cadence, an $80,000 imbalance on a single job is invisible. Bonding companies, banks, and the IRS all require or use it. The information sits in your books, but the report is what makes it usable.

THE FIX:
Confirm which method applies (PoC or completed-contract) by reviewing the §460(e) test and ASC 606 requirements with your CPA.

Build WIP monthly across active jobs. The columns are contract value, EAC, costs to date, percent complete, earned revenue, billings to date, and over/under.

Reconcile WIP to your general ledger monthly. Earned revenue on the schedule should match revenue recognized in your books. A gap means either the WIP math is off or the GL entries don’t reflect PoC properly.

Act on imbalances each month. Significant overbillings point to cash-flow or scope issues, while significant underbillings point to pay-app delays or unbilled change orders.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

FinTruction

06/17/2026

06/16/2026

06/15/2026

06/14/2026

06/14/2026

06/13/2026

06/12/2026

06/11/2026

06/10/2026

06/08/2026

Address

Website

Alerts

Contact The Business

Shortcuts

Share

Category