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A practical project-to-accounting reconciliation

A repeatable review of budget, commitments, posted costs and billing without assuming that project records automatically post to the ledger.

Charley Forey2 min readFinancialsAccountingControls
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  1. Agree on the scope
  2. Walk the sources

A project budget and a ledger balance can differ for good reasons. They measure different things and may use different cutoffs. A useful review explains the difference rather than forcing the totals to match.

Agree on the scope

Choose the project, company entity and cutoff. Identify the budget version and the accounting reports being compared. Assign a PM to explain scope and forecasts and an accounting reviewer to explain posted costs and balances. Keep a list of items that need follow-up.

Walk the sources

  1. Budget and changes. Compare the original budget with approved modifications and changes. List pending changes separately; do not treat a proposal as approved value.
  2. Commitments. Compare subcontracts and purchase orders with approved commitment changes. Review open amounts against bills and progress. A commitment is an obligation to perform or purchase, not itself a posted expense.
  3. Actual cost. Compare posted job-cost detail to the supporting bills or other posted entries, with project and cost codes in view. Investigate timing, coding, reversals and missing documents before adjusting a forecast. Unposted project direct costs and requisitions are not automatically ledger actuals.
  4. Billing and cash. Compare project pay applications with accounting invoices and receipts, including retainage. Record differences in timing or amount and who will resolve them. Project cash and accounting AR are separate workflows; an automatic bridge is unavailable.
  5. Remaining work. Ask the PM for a current cost-to-complete, including work not yet committed. Actual plus open commitments alone can miss future work. Record assumptions and review changes with the controller.

For example, a job with $80,000 of posted cost and $40,000 of remaining commitments has $120,000 in those two categories. If the PM expects another $15,000 of uncommitted work, a $135,000 estimate is more informative than treating $120,000 as the final cost. The estimate is not a cash forecast.

The accounting forecast implementation uses posted job-cost entries and approved project sources, subject to entity, source and historical-coverage checks. It does not post WIP. Historical project revisions and historical AR aging should not be assumed available; keep the evidence and reports used for each close. Read more about the boundary between Project Financials and company Accounting.

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Written by

Charley Forey

Founder of os.construction. We're building the operating system for construction. Project Financials follows job money, and company Accounting covers the books and controls. AI agents remain planned. We write about how money and data actually move on a job, and we build in public.

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