What is a Performance Bond?

Generally Accepted Accounting Principles (GAAP) are a set of standardized rules and procedures in accounting to provide consistency in financial reporting across different entities. In the construction industry, GAAP are of particular importance due to the unique nature of accounting involved. For instance, consideration of revenue recognition when recognizing costs for long-term projects is guided by GAAP. Under GAAP, the percentage of completion method is commonly used, allowing companies to report income as the work progresses, thus providing a more accurate view of the financial health of a construction company. Similarly, fixed asset accounting, inventory valuation, recognition of liabilities, and depreciation methods are all guided by GAAP in the construction industry. By adhering to GAAP, the construction industry ensures transparency, consistency, and comparability in its financial information, promoting investor confidence and informed decision-making.

The Matching Principle is a crucial accounting concept prevalent in the construction industry. This principle dictates that all expenses must be matched with the revenues they generated in a particular financial period, ensuring that all costs and income for each project are accurately reported on the income statement. For example, if a construction company incurs costs for labor, materials, and equipment in July and August for a project that's completed in September, those costs would be recorded in September when the income is recognized. This principle is essential as it provides a more accurate picture of a company's profitability and financial health for a specific period. It allows construction companies to better manage their cash flows, project budgeting, and financial planning.

A change order is an official amendment to a construction contract that modifies the original scope of work, timeline, or contract price. Unlike simple invoice adjustments, change orders require formal documentation and approval from all project parties before payment can be made. These modifications happen frequently in construction projects as conditions change, unforeseen issues arise, or clients request additional work beyond the original contract specifications.

For subcontractors, proper change order management can make the difference between getting paid for extra work and eating the costs. The challenge goes beyond just documenting changes—it's staying on top of approvals, tracking work that's moving forward without final sign-off, and making sure everything gets billed correctly. Too often, change orders get lost in email chains, verbal requests never get formalized, or approved changes don't make it into the next billing cycle, leaving subcontractors stuck with unbillable work. (For a detailed breakdown of change order processes and best practices, check out our change order guide.)

Siteline eliminates these change order headaches by tracking approval status in real-time, identifying which change orders are proceeding without final sign-off, and automatically incorporating approved changes into your billing schedule. With Siteline, you'll never lose sight of a change order again. Request a personalized demo to see how Siteline can protect your payments.