Here’s an Example Illustrating the Percentage Completion Method

Doing so improves the consistency of the percentage of completion results over time. In this article, I have tried to cover all the methods to calculate the percentage of completion in Excel. Take a tour of the practice workbook and download the file to practice by yourself. Overall, linking spreadsheets with platforms percentage of completion formula like QuickBooks or Sage can optimize construction project accounting and unlock deeper financial analysis capabilities. The integrated approach leads to greater efficiency, accuracy and transparency. Constructing an accurate picture of a construction project’s financial progress can be incredibly challenging.

• These differences in the billing amount are recorded as journal entries in the general ledger.
• The percentage of completion is a measure used to assess the progress of a project by comparing the actual work completed to the total work required.
• The percentage of completion method is used to calculate the amount of revenue and therefore income that can be recognized by a business on long-term construction project.
• Therefore, when seeking to determine the percentage of completed tasks, it is advisable to utilize quantitative data to calculate progress, rather than relying on other sources of information.
• Regardless of the accounting method your construction business is using, it’s important to take steps to secure your payments on every project.

This means for most long-term projects, the percentage of completion method should be used. International Financial Reporting Standards (IFRS 15) provides guidance on the treatment of stored materials in income recognition. Stored materials don’t represent completed work, so they have to be treated differently. In contrast with percentage of completion, the completed contract method is used to recognize project revenue and costs only when the contract is complete. The completed contract method is usually used in the residential sector and on small projects of short duration. Accounting for income and expenses can present a real challenge for contractors, especially on long-term projects.

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When you begin, it’s 20 percent complete and then it reaches 100 percent complete when finished. We’ve discussed what percent complete is and why it’s important in project management. Knowing if the team is behind or ahead of their deadline influences how you allocate your resources. For example, if the percent complete shows tasks are lagging, the project manager can reallocate resources to get back on schedule and keep the project on track. It serves the task management plan, which is a process to monitor your team’s tasks from start to finish.

Improper decimal formatting can also lead to errors in the calculation. It’s important to ensure that the cells are formatted correctly to display the desired percentage. Our videos are quick, clean, and to the point, so you can learn Excel in less time, and easily review key topics when needed.

How to Calculate Percent Complete

Dawn Killough is a writer with over 20 years of experience in construction, having worked as a staff accountant, green building advisor, project assistant, and contract administrator. She shares fundamental green building strategies and techniques in her book, Green Building Design 101. To show how the percentage of completion method is used in practice consider the following example.

• In Excel, “percent complete” usually refers to a calculation that shows the progress made towards completing a task or project as a percentage of the total work required.
• Conditional formatting uses formatting rules to apply different visual styles, such as colors, icons, and data bars, to cells based on their values.
• That’s why the Gantt chart is only one of our multiple project views in which you can track the percent complete of your team’s tasks.
• But we record only 3,600 in Cost of goods because we already recognized the total loss in the last period.
• You can meet with the team and use your experience with past projects to predict the percent complete.
• However, a drawback is that financial statements in early periods of long projects do not reflect ongoing construction activities.
• In case of long-term contracts, accountants need a basis to apportion the total contract revenue between the multiple accounting periods.