Landing a large commercial contract feels like a milestone, and it can be, but it also changes what your books need to handle in ways that catch a lot of contractors off guard if they're used to residential service work.

Payment terms are usually the first shift. Commercial clients commonly operate on net-30 or net-60 terms, sometimes longer, which means you're covering labor and material costs for weeks or months before that revenue actually lands in your account. If your cash flow forecast hasn't been updated to account for this delay, a big commercial job can create exactly the kind of cash crunch we've talked about this month, even though the job itself is profitable on paper.

Retainage is another wrinkle common in larger commercial and construction-adjacent work, where a percentage of the contract value, often 5 to 10 percent, gets withheld until the project is fully complete and approved. That retained amount needs to be tracked separately in your books, both because it affects your real cash position and because it needs to be accounted for correctly when the job is recognized as revenue.

Larger jobs also often involve progress billing, meaning you're invoicing in stages as work is completed rather than billing the full amount at the end. This requires your books to track revenue recognition against project milestones accurately, which is a more involved process than the invoice-on-completion model most residential work follows.

There's also simply more at stake if something goes wrong with the accounting on a job this size. A miscategorized expense on a $2,000 residential job is a rounding error. The same kind of mistake on a $200,000 commercial contract can meaningfully distort your understanding of whether that job was actually profitable.

If you're taking on bigger commercial work, or thinking about pursuing it, it's worth making sure your books are set up to handle the different payment structure and complexity before the first invoice goes out, not after the project's already underway.

Jeremy Brewer is the founder of 911 Bookkeepers LLC in Baton Rouge, Louisiana. He worked in the field as an HVAC tech before building books for the trades, and he serves as a licensed paramedic in EMS. He is a Xero Certified Advisor.