St. Louis Contractor’s Guide: Understanding Percentage of Completion Method

Hey there, fellow construction industry movers and shakers! Braden Hallman here, your friendly neighborhood bookkeeper with a penchant for numbers and a soft spot for hard hats. Today, we’re diving into the wonderful world of the Percentage of Completion (POC) method. Buckle up, because this ride’s about to get as bumpy as a St. Louis pothole!

The POC Method: Not Your Average Accounting Rodeo

Let me tell you, when I first encountered the POC method, I felt like I was trying to nail jelly to a wall. But fear not, my contractor comrades! Once you get the hang of it, it’s smoother than a freshly poured concrete slab.

So, what’s the deal with POC? In a nutshell, it’s a way to recognize revenue and expenses on long-term projects based on the percentage of work completed. It’s like measuring your progress on that never-ending basement renovation, but with more decimals and fewer beer breaks.

Why POC Matters for St. Louis Contractors

Now, you might be thinking, “Braden, why should I care about this accounting mumbo-jumbo?” Well, my friends, POC is more important than finding a good parking spot downtown during a Cardinals game. Here’s why:

• Accurate financial reporting (because who doesn’t love precision?)
• Better cash flow management (ka-ching!)
• Improved decision-making (no more eeny, meeny, miny, moe)
• Easier tax planning (Uncle Sam will thank you)

The POC Method: A Real-Life Example

Picture this: You’re working on a $1 million project to build the world’s largest gooey butter cake (because why not?). The project is expected to take two years. By the end of year one, you’ve completed 40% of the work and incurred $350,000 in costs.

Using the POC method, you’d recognize $400,000 in revenue (40% of $1 million) and $350,000 in expenses for year one. It’s like getting a participation trophy, but with actual money!

The POC Method: Tips and Tricks

Now, I know what you’re thinking: “Braden, this sounds more complicated than assembling IKEA furniture.” But fear not! Here are some tips to make the POC method your new best friend:

1. Keep detailed records (yes, even more detailed than your fantasy football spreadsheet)
2. Regularly update your cost estimates (because surprises are only fun at birthday parties)
3. Use reliable project management software (trust me, your Excel skills will thank you)
4. Consult with a professional (hey, that’s me!) for guidance

The POC Method: Pitfalls to Avoid

Now, I wouldn’t be doing my job if I didn’t warn you about some potential pitfalls. Think of these as the accounting equivalent of leaving your tools out in the rain:

• Overestimating completion percentage (optimism is great, but not here)
• Underestimating total project costs (nobody likes surprises on the final bill)
• Inconsistent application of the method (flip-flopping is for politicians, not accountants)
• Failing to adjust for change orders (because clients never change their minds, right?)

Wrapping It Up: The POC Method and You

Listen, I get it. Accounting might not be as exciting as watching paint dry (though some days, it comes close). But trust me when I say that mastering the POC method can be a game-changer for your construction business.

It’s like having a secret weapon in your tool belt, right next to that lucky hammer and the sandwich you forgot about last week. With POC, you’ll have a clearer picture of your financial health, better control over your cash flow, and maybe even impress your banker the next time you need a loan (no promises, though).

So, my fellow St. Louis contractors, are you ready to tackle the POC method head-on? Remember, I’m always here to help you navigate these murky financial waters. After all, someone’s got to keep you from drowning in a sea of numbers (and it might as well be me).

Until next time, keep building, keep counting, and for heaven’s sake, keep those hard hats on. This is Braden Hallman, signing off!