Construction-in-Progress with Cabbage and Sage

Companies need to keep track of their long-term liabilities, and this includes real-estate. Property is usually recorded as an in-process cost on a balance sheet.

Construction companies log ongoing projects as construction-in-progress. This helps them track the costs incurred up until that point, and makes it easier to see if a project is progressing according to estimates.

Why CIP Can Remain on the Books for Years

It is much easier to track expenses when costs are resolved, and materials reach their final form within a short time. When it comes to construction projects, things are rarely this simple.

Companies that handle the construction of large facilities over weeks, months, or even years will keep construction-in-progress on the books until the task is finished. As expenses and timelines change, this factor is updated to keep things accurate. Companies may even use multiple CIP accounts to track the progress of different properties.

Calculating Invoices for the CIP Balance

The CIP balance includes many data points, including the total of all invoices received up until that point. Architects, consultants, contractors, managers, and insurers may all directly bill a company for their services. All these costs can be added together to reflect the sum of costs up until that point.

As a project progresses and the state of resources are transformed, the CIP balance will be updated to reflect these changes. This type of report provides companies with an easy way to see how their costs are adding up and whether they’re paying off.

Businesses rack up a number of costs that aren’t listed on traditional invoices. Interest fees, lender costs, and legal fees can also be tracked on the CIP balance.

When is the CIP Balance Removed?

When a company sees their in-progress resources converted to completed projects, those assets are placed in service. The CIP data is removed from the balance sheet and replaced with a standard asset account.

Lenders often base loan values off CIP accounts. Companies that are accurate with their reports can reduce costs and make it easier to get the financing they need. The CIP balance may be a complex data point, but it is vital for helping organizations improve their efficiency.