How to Record WIP Inventory for Spec Builders in QuickBooks

By Jon Markee, Your Builder CPA

Introduction

For production builders or spec home builders, accurate financial reporting requires special attention to how revenue and costs are recognized. If you don’t sell the home until it’s fully built and transferred to the homeowner, then recognizing income before that point can skew your books. In this blog post, Jon Markee, your Builder CPA, walks you through a specialized workflow in QuickBooks to properly handle WIP (Work in Progress) for unsold homes.

Revenue Doesn’t Count Until the Home is Sold

For builders working on spec, title doesn't pass to the homeowner until closing is complete. That means revenue shouldn't be recognized until the home is fully completed and sold. If you’re recognizing income before this point, your financials are likely overstated and inaccurate.

Focus on the P&L by CustomerAt month-end, head to the Profit and Loss by Customer Report 

in QuickBooks. Use this to identify which jobs are completed (and should appear on your P&L) and which are still under construction. Only the closed homes should be left untouched — the rest need to be adjusted.

Move Construction Costs to the Balance Sheet

Homes still under construction shouldn’t have their costs sitting on the P&L. Instead, those costs belong in an asset account — like Direct Construction Cost or a WIP Inventory account — until the job is done. This avoids prematurely showing expenses (and losses) for jobs that aren't yet generating revenue.

Create a Journal Entry to Adjust WIPExport your P&L by Customer report to Excel. In a new sheet, begin building a journal entry to reverse revenue and expenses for jobs still in progress. Here's the flow:

• Debit Sales and Credit Discounts (to reverse revenue).

• Credit Direct Construction Costs (to remove expenses from the P&L).

• Debit your asset account (WIP Inventory or similar) to hold these costs on the Balance Sheet.

You can manually enter the journal entry or use tools like SaasAnt, Transaction Pro, or QuickBooks Online Advanced’s journal upload feature.

Exclude Completed Homes

Leave out jobs that have closed. Their revenue and costs should stay on the P&L. Only adjust homes still under construction.

Double Check: Does Your Journal Entry Balance?Your total debits should equal your total credits. After saving the journal entry, check your P&L by Customer to make sure the open jobs now show zero for both revenue and cost. Then review your Balance Sheet to confirm the WIP amount is posted correctly under current assets.

Reverse the Entry on the First of the Next MonthThis journal entry is only valid as of the last day of the month. Since construction continues, you’ll need to reverse it on the first day of the following month to allow ongoing expenses to flow correctly. Most accounting software allows you to automatically reverse journal entries — a huge time-saver.

Pro Tip: Attach your Excel or Google Sheet calculation directly to the journal entry as backup. This ensures your logic is traceable and easy to revisit during audits or questions.

This month-end WIP workflow is essential for accurate financials if you're a production builder working on spec. By moving costs off the P&L until a sale closes, you prevent inflated losses and ensure cleaner reporting. It may take a little extra effort, but the payoff in accuracy is well worth it.

Still have questions? Watch our full video walkthrough, where Jon Markee, your Builder CPA, breaks down each step in detail. Or reach out directly — we’re here to help.