General Inquiries

How long should you hold onto accrued subcontractor costs?

  • 1.  How long should you hold onto accrued subcontractor costs?

    Posted 11-08-2018 16:19
    We have set-up an accrual to keep track of subcontracts that were not fully billed where we cannot get the subcontractor to send us their final invoice.  These are subcontracts on jobs that are closed. How long should we hang onto the accrual for each un-billed subcontract?  In other words, how long until a subcontractor can no longer bill against their subcontract?

    Thanks

    Jordan Davidson
    Accounting
     
    1033 Lafayette Ave
    Terre Haute, IN 47804
    812-232-3700 Office
    812-235-6757 Fax


  • 2.  RE: How long should you hold onto accrued subcontractor costs?

    Posted 26 days ago
    Any thoughts CFMA? I didn't receive any responses. Thanks in advance.

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    Jordan Davidson
    Accountant
    Keymark Development, Inc.
    Terre Haute IN
    (812) 232-3700
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  • 3.  RE: How long should you hold onto accrued subcontractor costs?

    Posted 26 days ago
    Jordan,

    Your post didn't list the reason for the subcontractor failing to bill. If the work has been completed and accepted, I would lean towards sending them a check for the balance or reporting as unclaimed funds if you can't contact them via mail. The facts of each case should dictate how it should be handled, but if a subcontractor is poor at managing their billings, I'd tend to send them the balance of the contract without an invoice unless there was another reason to withhold funds.

    Best,

    Kevin Halme
    Constructive Tech Solutions
    Omaha NE
    www.consttech.solutions


  • 4.  RE: How long should you hold onto accrued subcontractor costs?

    Posted 25 days ago

    Hi Jordan,

    Technically, you are responsible for paying your subcontractor for the work that they perform regardless of they send you an invoice or not. For the sake of simplicity, I would pay them what they are owed and move on. This way you do not have to hang on to those committed costs, indefinitely. Thank you!

     

    Chris Gibbons

    Accounting / Contracts

    Prairie Electric, Inc.

    Office  360-573-2750

    Fax       360-576-7422

    Web     prairielectric.com

     

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    6000 NE 88th Street

    Vancouver, WA 98665

     






  • 5.  RE: How long should you hold onto accrued subcontractor costs?

    Posted 25 days ago

    At year-end we accrue cost of unbilled work and we normally carry the accrual for 1 year.

     

    acClrInc.jpg.

    Barbara Kuntz

     

    2904 N. Madelia St

    PO Box 7339
    Spokane, WA 99207

    P. 509 | 489.0563

    F. 509 | 489.0574

    barb@acispokane.com

     






  • 6.  RE: How long should you hold onto accrued subcontractor costs?

    Posted 25 days ago
    Invoicing and payments are part of the contractual obligation that you entered with the sub. If they have performed the work and fulfilled all requirements, then they should be paid. I would normally issue a formal letter, confirming the final subcontract amount including all COs and issue the check for the balance or retainage to clean up our books. A different situation would be if you are still waiting on them to comply with their obligations - final lien waiver, close outs, O&Ms, etc. In this case, I would keep this open for 3 years and then reclass to misc income, but I would keep a spreadsheet on the side and if ever they decide to comply - I would check the spreadsheet and will reimburse any invoices received. This is done to keep our AP current with not too many old aging payables. So you could not get away from not paying them if they comply eventually. If you have all processes in place, however, you would have minimal or no delayed invoicing. We have a Sub closeout analysis with confirmed contract amounts that gets completed just before closing the project. We do not release a check unless sub complies with everything dictated in their subcontract.
    In addition, you have already shown the committed cost under the job, so writing it off will change estimated cost at completion and might be a prior period adjustment on the statement since the projects were completed in prior years.
    The plug in can be done by fictitious invoicing through AP (under sub) into the misc income account so that your project #s stay the same and crediting the misc income account in distributions, and a zero check to take it off the AP list.
    I have not heard, however, for any expiration dates. You might check whether you could plug in language in your Subcontract, however, if you are on cost plus or T&M contract, you would be obligated to refund this to the client, so it would create a lot of extra work.
    Our items left out are not as significant on case by case basis and is mostly retainage to be released pending receipt of close outs.


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    Angel Goldman CCIFP, MBA
    CFO
    Bartlett Brainard Eacott
    Bloomfield CT
    (860) 922-5009
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