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The percentage-of-completion method is an accounting method used in the construction industry to recognize revenue and expenses for long-term projects as they progress—rather than waiting until the project is completed. Under the POC method, a contractor or subcontractor estimates the total contract revenue, total contract costs, and the percentage of work completed during a specific accounting period.

Revenue is recognized based on the percentage of work completed multiplied by the total estimated contract revenue. Expenses are recognized based on the percentage of work completed multiplied by the total estimated contract costs. This method aims to provide a more accurate representation of a construction project's financial performance over its duration rather than recognizing all revenue and expenses at the end.

For subcontractors and their accounting teams, understanding the POC method is crucial for three reasons:

1. It directly impacts their revenue recognition and financial reporting, enabling them to assess profitability throughout project lifecycles. 
2. It affects their cash flow projections and management, as progress payments are typically tied to the POC. 
3. Understanding this method ensures compliance with accounting standards and regulations, minimizing the risk of audits or penalties.

Siteline supports the POC method, ensuring accurate financial reporting and cash flow management. With Siteline, you can:

• AGÕæÈËÓÎÏ· custom pay applications using real-time POC calculations
• Integrate with general contractor (GC) payment portals to ensure timely and accurate submissions
• Gain real-time insights into project financials with intuitive dashboards
• Centralize all documentation for improved field-to-office collaboration

Book a demo today to discover how Siteline can enhance your accounting processes, strengthen your cash flow, and ultimately contribute to your company's financial success.

A prime contractor, also commonly referred to as a general contractor, is the main contractor responsible for managing an entire construction project. They are in direct contact with the build’s owner/developer and hold primary responsibility for the construction, execution, quality, and completion of the project under the agreed terms and schedules. As such, the prime contractor addresses concerns and resolves issues related to the project, contributing to the effective execution and timely delivery. The prime contractor also manages the procurement of materials, labor, and equipment, ensuring compliance with building codes and regulations.

A critical part of the prime contractor’s job is hiring and managing trade contractors, also known as subcontractors, who specialize in specific construction trades like electrical, plumbing, framing, etc. The prime contractor essentially acts as a hub, contracting out portions of the work to skilled trade contractors while retaining overall control of the project operations.

Prime contractors have a vested interest in working with subcontractors who not only are highly skilled in their respective trades but also have efficient, well-defined operational and financial workflows to ensure reliability and consistency in their performance. Streamlined billing processes are crucial in this regard. When subcontractors can quickly and accurately generate pay applications—complete with the necessary compliance documentation and lien waivers—it allows the prime contractor to bill the project’s owner promptly and get paid faster. Delays in subcontractor billing can significantly impede the prime contractor’s ability to get paid in time, thereby causing delays in payments to other contractors, too. 

This is where a solution like Siteline can ultimately benefit prime contractors by helping their subcontractors streamline billing processes. Siteline accelerates subcontractor billing by automatically generating pay apps per prime contractor specifications, tracking compliance requirements, managing change orders and lien waivers, and providing payment visibility. When subcontractors use Siteline to automate billing, prime contractors receive accurate, compliant pay applications faster, allowing them to bill project owners promptly and get paid quicker as a result.

See how Siteline can accelerate your construction billing cycle and get you paid faster by scheduling a demo today.

Revenue recognition in the construction industry is a principle that determines when a company earned revenue is considered. It's not as simple as recognizing revenue when cash exchanges hands. Rather, it's a method used to determine the precise point when contractually stipulated work has been completed for which payment can be recognized. Often, this involves matching invoices to the percent of completed work on a given project. Stage of completion or percentage-of-completion method is utilized, allowing them to record revenue progressively as the project progresses. It's a critical aspect of financial reporting, ensuring revenues, and profit margin correctly reflect the company's current operations. This principle is guided by GAAP and IFRS standards.