Year-End Accounting Cleanup: What Every Contractor Should Do Before Closing the Books

The end of the year sneaks up on everyone in construction. You’re busy closing out projects, managing crews, and trying to squeeze in one more job before the holidays. The last thing on your mind is your accounting.

But here’s the reality: the work you do on your books in November and December determines how clean your tax return is, how accurate your financial statements are, and how much you end up paying the IRS. Skip the cleanup now and you’ll pay for it later, either in penalties, missed deductions, or hours of back-and-forth with your CPA in March trying to figure out where $40,000 went.

Here’s what every contractor should be doing right now to close out the year clean.

Reconcile Every Bank and Credit Card Account

This sounds basic, but you’d be surprised how many contractors go months without reconciling their accounts. Reconciliation means matching every transaction in your bank and credit card statements to what’s recorded in your accounting software.

If you use QuickBooks, pull up each account and reconcile it through the current month. Look for transactions that don’t match up. Look for charges you don’t recognize. Look for deposits that were recorded but never categorized.

If your “Uncategorized” or “Ask My Accountant” account has more than a handful of transactions in it, that’s a red flag. Every one of those is a question mark on your books, and your CPA is going to have to chase down every single one before they can file your return. Spend the time now to categorize them properly. It saves hours and money later.

Review Your Accounts Receivable

Pull a detailed aging report for your accounts receivable. This shows you every outstanding invoice and how long it’s been sitting there.

For construction companies, this is especially important because of retainage. You probably have retainage receivables from multiple projects at different stages. Make sure those amounts are accurate and that you’re tracking them separately from regular receivables. Your CPA needs to know which receivables are retainage and which are standard billings when they prepare your financial statements.

While you’re at it, look at anything over 90 days. Is that invoice actually collectible? If a customer hasn’t paid in three months and isn’t responding, it might be time to write it off as bad debt. That’s a deduction, but only if you handle it correctly.

Follow up on every outstanding invoice before the year ends. Cash collected in December is 2025 revenue. Cash collected in January is 2026 revenue. Depending on your accounting method, that timing matters.

Review Your Accounts Payable

Now look at the other side. What do you owe?

Pull your accounts payable aging report and make sure every bill is recorded. Check with your project managers to see if there are any subcontractor invoices or material bills that came in but haven’t been entered into the system yet. It happens constantly in construction because invoices get left in truck cabs, emailed to the wrong person, or just forgotten in the chaos of a busy job.

Every legitimate business expense that belongs in 2025 needs to be recorded in 2025. If a bill came in November but doesn’t get entered until February, you might miss the deduction entirely for this tax year.

Also review any retainage payable. If you’re holding retainage on your subs, make sure those amounts are properly tracked and classified. Bonding companies look at this number closely.

Clean Up Your Job Cost Reports

Run a job cost report for every active and recently completed project. Compare estimated costs to actual costs. Look for any jobs where costs seem unusually high or low compared to the original estimate.

This is where you catch problems. Maybe materials were charged to the wrong job. Maybe a subcontractor invoice got coded to overhead instead of the specific project. Maybe labor hours were allocated incorrectly.

These errors don’t just affect your project profitability reports. They affect your WIP schedule, your financial statements, and ultimately your taxes. The time to fix job cost errors is now, not during an audit two years from now.

For completed projects, make sure all final costs have been recorded and all revenue has been billed. There shouldn’t be any open items on a finished job. If there are, close them out.

Update Your Equipment and Asset Records

Did you buy any trucks, equipment, tools, or technology this year? Make sure every purchase is recorded as a fixed asset with the correct date, cost, and description.

This matters because of depreciation. Section 179 and bonus depreciation can let you write off significant equipment purchases in the year you buy them. But your CPA can only apply these deductions if they know what you bought and when.

Go through your bank statements and credit card records for the year. Look for any large purchases that might have been expensed instead of capitalized, or that were recorded but not classified as assets. A $30,000 truck that got buried in a general expense category is a missed opportunity for a major deduction.

Also check if any equipment was sold, scrapped, or taken out of service this year. Those dispositions need to be recorded too, because they affect your depreciation schedules and may trigger gains or losses on your return.

Verify Subcontractor Information for 1099s

Every subcontractor you paid $600 or more during 2025 needs a 1099-NEC by January 31, 2026. That deadline is firm, and the penalties for missing it start at $60 per form and go up from there.

Don’t wait until January to start collecting W-9s. Start now. Pull a report from your accounting software showing every vendor you paid this year. Identify which ones are subcontractors versus suppliers or corporations. Then make sure you have a current W-9 on file for each one with their correct legal name, address, and tax ID number.

If any information is missing or outdated, reach out now while people are still answering phones. Trying to track down a sub’s tax ID on January 28 when they’re already on a new jobsite is not a situation you want to be in.

Review Your Payroll Records

Before the year closes, verify that all payroll has been processed correctly. Check that every employee’s information is current, including addresses, withholding allowances, and pay rates.

If you had employees working in multiple states, make sure the state tax withholding was applied correctly for each jurisdiction. This is a common issue in construction where crews move between states regularly.

Check that all bonuses, reimbursements, and fringe benefits are properly recorded. Things like personal use of company vehicles, health insurance contributions, and retirement plan contributions all need to be reflected accurately on W-2s.

If you’ve been using any workers as day laborers or temporary help, review their classification. Were they actually employees who should have been on payroll? This is the time to address that before W-2s and 1099s go out, not after the IRS sends you a letter.

Take a Hard Look at Your Profit and Loss Statement

Pull a P&L for the full year and actually read it. Don’t just look at the bottom line. Go through each expense category and ask yourself: does this number make sense?

If office supplies shows $15,000, that’s probably wrong. If fuel expenses are way higher than last year but you didn’t add any trucks, something got miscoded. If there are large round-number entries that you don’t recognize, dig into them.

This is also a good time to compare this year to last year. Big swings in any category should have an explanation. If they don’t, that’s where errors are hiding.

Your CPA will do a review of this too, but the more cleanup you do before you hand over the books, the faster the process goes and the less you pay in accounting fees.

Plan a Year-End Meeting with Your CPA

If you haven’t already, schedule a meeting with your CPA before December 31. Not in January. Not in March. Now.

A year-end planning meeting is where you discuss equipment purchases you’re considering, income you could defer or accelerate, retirement plan contributions, estimated tax payments, and any changes to your business structure.

Every one of these decisions has a December 31 deadline. Once the calendar flips, most of these opportunities are gone for 2025. A 30-minute conversation now could save you thousands on your tax bill.

The Bottom Line

Year-end accounting cleanup isn’t glamorous. It’s tedious, it’s time-consuming, and it always comes at the worst possible time. But every hour you spend cleaning up your books in November and December saves you multiple hours and real dollars during tax season.

Don’t hand your CPA a mess in March and expect a clean return in April. Do the work now. Your future self will thank you.

---

Xtrategist CPA specializes in accounting and tax strategy for construction companies, tech founders, and professional services in Atlanta and across Georgia. If you need help getting your books ready for year-end, let’s talk.

Schedule a free consultation at xtrategist.com or call (678) 401-6118.