Contractor Finance Glossary
What is Percentage of Completion (POC)?
Also called: POC, percentage-of-completion method
Percentage of completion is the accounting method that recognizes contract revenue in proportion to how much of the job is done, usually measured as cost incurred to date divided by total estimated cost.
Long jobs break the simple rule of recognizing revenue when you invoice. Percentage of completion fixes that by matching revenue to the work actually performed each period, so a job that is 60% through its costs recognizes 60% of its contract value.
POC is the engine behind the WIP schedule and behind lender-facing and bonding-facing statements. It depends entirely on a reliable total-cost estimate. If the estimate is wrong, the percent complete is wrong, and every downstream number, including margin and earned revenue, is wrong too.
How it is calculated
Percent complete = cost incurred to date divided by total estimated cost. Revenue recognized this period = (contract value times percent complete) minus revenue already recognized in prior periods.
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