Bookkeeping for tradies: progress claims, retentions and cash

Progress claims are not ordinary invoices

On larger jobs you bill in stages, a deposit, then claims at defined milestones or monthly based on work completed. Every claim needs to reconcile back to the contract value, including approved variations, so at any moment you can answer two questions: how much of this contract have we claimed, and how much's left? Books that treat each claim as an unrelated invoice lose that running position, and disputes about what's been billed turn into arguments nobody can settle from the records.

Variations deserve their own discipline. Work done on a verbal say so, priced later and billed from memory, is exactly where margin quietly disappears. Every variation should be documented, priced and approved before it's built, then billed as a visible line so the paper trail matches what actually happened on site.

Retentions: earned money you cannot spend yet

Many commercial contracts let the customer withhold a percentage of each claim, commonly released in parts at practical completion and after the defects liability period. That money is yours, it just might not arrive for a year or more. The bookkeeping needs to show retention receivables separately from normal debtors, with expected release dates, so the money's neither forgotten nor mistakenly counted as available cash.

• Record the retention withheld on each claim at the time of the claim, not whenever someone remembers later.
• Keep a retention schedule by job showing amounts held, release conditions and expected dates.
• Review it whenever a job reaches practical completion or a defects period ends, because unclaimed retentions are simply donations at that point.
• Treat retention releases as a distinct line in your cash flow forecast rather than lumping them in with general collections.

Job costing keeps the quoting honest

Every supplier bill, subcontractor invoice and labour hour should land against a job code the moment it's entered. The payoff is a live answer to the question that matters mid project: are we still on track against the quote? As an illustration, a job quoted at $180,000 with costs budgeted at $135,000 might show $110,000 of costs booked at sixty percent completion. That trajectory points toward roughly $183,000 of final cost, and knowing it with forty percent of the job still to go gives you options a post job autopsy never can.

Subcontractor payments carry an extra obligation: businesses in building and construction generally need to report payments to contractors to the ATO through the taxable payments annual report. Clean, correctly coded subcontractor records kept all year turn that report into a formality instead of a scramble; check the current requirements on the ATO website or with your adviser.

Cash flow around GST and the claim cycle

The gap between paying for materials and labour and actually receiving a progress claim payment is the defining cash flow feature of the industry, and retentions stretch it further still. GST adds its own timing questions, since whether you account for GST on a cash or accruals basis changes when GST on claims falls due; the right setting depends on your circumstances, so confirm it with your adviser or the ATO. A weekly cash flow view that includes claim dates, retention releases and BAS payments stops these known events arriving as surprises.

Books that match the job site

NextEra works with trade and construction clients on exactly these mechanics: progress claim tracking, retention schedules, job costing and management reports that show margin by job while the job's still running. Books unable to tell you which jobs made money and where your retentions sit? A Strategic Finance Review is a practical way to get that visibility.