How do I accrue for received-not-invoiced costs on construction projects?

Key takeaways

• Received-not-invoiced accruals capture materials and subcontractor work that have been delivered or completed but not yet billed, preventing understated project costs at month-end.
• The accrual process requires matching open purchase orders to receiving logs and field documentation, then recording the estimated liability in your general ledger.
• Accruals should be assigned to the correct job number and cost code, then reversed when the actual invoice is received and processed.
• Vergo codes transactions the moment they happen and syncs them into your construction ERP, giving real-time visibility into receipts and completed work without manual accrual effort during month-end close.

Why received-not-invoiced accruals matter in construction

Construction projects frequently have costs that are incurred but not yet invoiced, such as materials received at the job site or subcontractor work performed. These uninvoiced costs often go unrecorded, leading to understated expenses and inaccurate financial reporting at month-end. The problem typically stems from disconnected purchasing, receiving, and accounting processes. Purchasing agents order materials without notifying accounting, subcontractors complete work but delay invoicing, and received items are never matched to open purchase orders. Without proper accruals, project managers see incomplete cost data, making it difficult to forecast cash needs or assess job profitability accurately.

How to identify and calculate uninvoiced costs

Start by reviewing all open purchase orders in your construction ERP to determine what materials or services have been received but not invoiced. Cross-reference job site receiving logs, subcontractor timesheet data, and other field documentation to identify received items without invoices. Calculate the accrual amount based on PO values, contracted rates, and quantities received. For materials, use the PO price multiplied by the quantity logged as received. For subcontractor work, apply the contracted rate to hours or units completed according to field records. If exact quantities are unavailable, estimate conservatively based on the percentage of work completed or typical delivery patterns for similar orders. Vergo eliminates this manual matching process by coding costs in real time as transactions happen, with no waiting for clearing, then syncing them directly into your accounting or ERP software.

Recording and reversing accruals in your ERP

Enter the accrual amounts as liabilities in your general ledger, assigned to the appropriate cost codes and job numbers. The journal entry typically debits the job cost account and credits an accrued expenses or accounts payable accrual account. This ensures project costs are recognized in the period they are incurred, not when the invoice arrives. Schedule a reminder to reverse the accruals once the actual invoices are received and recorded. The reversal prevents double-counting: when the invoice posts, it will carry the same cost code and job number, replacing the estimated accrual with the actual amount. Any difference between the accrual and the invoice should be investigated and adjusted in the current period.

A practical example

A general contractor receives 500 cubic yards of concrete on March 28 for a hospital renovation project. The delivery ticket is logged by the site superintendent, but the supplier's invoice does not arrive until April 3. The purchase order shows $150 per cubic yard, so the accounting team records a March 31 accrual of $75,000, debiting cost code 03-300 (Concrete) for Job 2024-105 and crediting Accrued Expenses. On April 3, they reverse the accrual. When the supplier's invoice posts on April 5 showing $75,200 (a $200 variance due to fuel surcharges), the full invoice amount is recorded in April, and the $200 difference is recognized as an April cost variance rather than distorting March job cost reports.

Best practices for construction teams

Require field teams to promptly log all material receipts and subcontractor work so accounting has the data needed for accruals. Enforce a policy of matching purchase orders to receipts before approving invoices for payment, which helps catch discrepancies early. Train accounting staff on recognizing common accrual scenarios in construction, such as recurring subcontractor work, bulk material deliveries, and equipment rentals that span month-end. Review accrual reports regularly to identify patterns and process improvements. For example, if certain suppliers consistently invoice late, you can anticipate the accrual and streamline the close process.

How Vergo handles this

Vergo codes transactions the moment they happen, eliminating the gap between when a cost is incurred and when accounting sees it. Costs are ready to code in real time, with no waiting for clearing, and once they clear, they sync into your construction ERP or accounting software. Vergo integrates with every ERP and accounting platform, so card spend, employee reimbursements, and AP invoices run through one coding model with the same coding, same review, and one reconciliation. Employees handle everything by text message, with no app to download or portal login, and Vergo chases missing receipts itself. Approval workflows are optional and fit how you already control spend: route by GL account, by amount, or by project, or skip approval flows entirely and let policy flags catch only what breaks a rule. Vergo proposes the coding by inference from your own accounting structure and history, with no rule library to build and no keyword lists to maintain, and every coding shows why it was chosen so a reviewer confirms in seconds instead of re-coding by hand.

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