Property accountants for developers: WIP, revenue recognition, and project cash flow

Property development is one of those businesses where the paperwork can look “fine” while the project cash position is quietly heading for a wall. Your profit might be real, but it’s often locked up in work done, materials on site, or units that haven’t legally completed yet. That’s why good developer accounting isn’t just about year-end compliance — it’s about staying in control of WIP, when you can recognise revenue, and whether the next 6–12 weeks of cash actually works.

The timing matters even more in a market that can swing quickly. The Office for National Statistics reported total construction new orders rising by 9.8% (£1,078 million) in Q3 2025 vs Q2 2025. And government construction materials commentary has pointed to growth projections into 2026 (with different performance by sector). Translation: there’s work out there, but your finance systems need to be solid enough to cope with stop-start delivery, delayed approvals, and price changes.

Below is how you should think about the numbers — in plain English — and what a developer-focused accountant actually helps you put in place.

1) WIP: what it is (and why it’s not just “costs so far”)

WIP (work in progress) is the value of what you’ve started building but haven’t yet sold/finished (depending on the accounting treatment). For developers, WIP usually includes:

  • land acquisition costs (where appropriate)
  • build costs (labour, subcontractors, materials)
  • professional fees (architects, engineers, planning, surveys)
  • site overheads that directly relate to the project
  • finance costs sometimes (depending on structure and reporting framework)

Under UK GAAP, WIP commonly sits within inventories (think “stock and work in progress”), and the rules about what can and can’t be included are set out in FRS 102 inventories guidance.

The practical risk: if you’re not tracking costs cleanly, you can end up with:

  • overstated profit (because costs are missing or mis-coded)
  • understated profit (because project costs are dumped into overheads)
  • confusing lender packs (because the numbers don’t tie out)
  • “surprise” tax bills (because accounts show profit you haven’t actually banked)

This is where a specialist FHP Accounting-style setup helps: the goal is boring, consistent coding and project visibility. If your bookkeeping isn’t reliable, the rest is guesswork — and guesswork is expensive. See Why accurate bookkeeping matters and Xero bookkeeping for the foundations.

2) Revenue recognition: when “a sale” is actually a sale

Developers often assume revenue is recognised when a unit is “basically done” or when the buyer pays a deposit. In reality, the timing depends on what you’re delivering and what reporting framework applies.

Developer vs contractor: a key distinction

  • If you’re selling completed units (common in housebuilding), revenue is often recognised at a point in time (usually legal completion), because that’s when control passes.
  • If you’re delivering a construction service under a contract (common in contracting), revenue may be recognised over time using a measure of progress (stage of completion). Over-time recognition is a core concept in IFRS 15 and also influences updated revenue models. 

UK GAAP (FRS 102) also contains specific requirements for revenue and construction contracts, and the treatment hinges on contract terms, performance obligations, and how reliably outcomes can be measured. 

Why this matters to you

Revenue recognition drives:

  • reported profit (and therefore tax timing)
  • available reserves (e.g., dividends)
  • lender covenant calculations
  • how “healthy” the project looks on paper

If you’re unsure whether your projects should be treated as WIP/stock until completion, or recognised progressively, don’t wing it. Get the contract reviewed properly — it’s one of the most common areas where developers get caught out.

3) Job costing that actually works: plots, phases, and packages

In developer accounting, detail wins. You want to be able to answer questions like:

  • “What’s the gross margin on Phase 1 vs Phase 2?”
  • “Are foundations running over budget, or is it a timing issue?”
  • “Which plots are cash-negative right now?”
  • “Are variations and extras being captured properly?”

A clean way to do this in Xero is to combine sensible accounts with project/phase tracking. Start here: Xero Projects and Tracking Categories and then tighten your routines with Month-end in Xero and 5 Quick Xero Tips.

A simple structure most developers can live with:

  • tracking category 1 = project (Site A / Site B)
  • tracking category 2 = phase (Phase 1 / Phase 2)
  • Xero Projects (optional) = plot-level detail where needed

This gives you reporting that’s actually usable — not just a year-end bundle of numbers.

4) Project cash flow: profit isn’t cash (and never has been)

Developers don’t go under because the margin was 18% instead of 22%. They go under because cash timing doesn’t work.

Your cash flow should be built around:

  • land payments and staged consideration
  • build programme and subcontractor payment terms
  • VAT timing (and whether you’re reclaiming or paying)
  • professional fees that land early (planning, design, surveys)
  • utilities connections and final sign-off costs
  • sales pace assumptions (and realistic completion dates)
  • contingency (often 5%–10% depending on project risk)

Also: taxes don’t wait for you to feel ready. If your accounts show profit because of revenue recognition timing, your tax position may move faster than your bank balance.

If you want this managed properly without building a full in-house finance team, Outsourced finance department support is often the sweet spot — consistent bookkeeping, management reporting, and forecasting, with someone keeping an eye on the numbers every month.

5) VAT and tax: the areas that bite developers hardest

VAT and property tax decisions can be high-impact, and mistakes are rarely small. You may be dealing with:

  • VAT on professional fees and build costs
  • the VAT treatment of different property types
  • “option to tax” decisions in some scenarios
  • timing issues around VAT reclaims

If you’re not confident, get the right support early via VAT return services and Property tax accountants.

And don’t ignore reliefs that affect cash. Depending on the property and spend type, Capital allowances on property can materially improve your after-tax position in the year you spend the money (where the rules allow).

6) Year-end accounts: make them useful, not just compliant

Yes, you need accounts for Companies House and HM Revenue & Customs — but you also need management information that tells you what’s happening mid-build, not 9 months later.

Done properly, your year-end pack should tie back to:

  • WIP position by project/phase
  • revenue recognition approach (documented)
  • margins you can explain (not just “it’s what the accounts say”)
  • cash flow performance vs forecast

For the compliance side, Annual statutory accounts are the baseline — but the real value is when the monthly numbers match the year-end story.

FAQs

What does WIP mean in property development accounting?

WIP (work in progress) is the cost (and sometimes value) of development activity that’s underway but not yet finished or sold, depending on the accounting treatment. Typically, it captures build costs, professional fees, and other directly attributable project spend. Under UK GAAP, WIP commonly sits within inventories/stock and has specific rules around measurement and what costs can be included. 

When can I recognise revenue on a development?

It depends on what you’re delivering and your contract terms. For many developers selling completed units, revenue is often recognised at a point in time (commonly legal completion). For construction-style contracts, revenue may be recognised over time using progress measures. Standards such as IFRS 15 set out how over-time recognition works, and UK GAAP has its own specific requirements. 

Why do my accounts show profit when I feel cash-poor?

Because profit is accounting-based and cash is timing-based. You can have large WIP, delayed completions, retention, staged costs, or tax/VAT timing differences that create a cash squeeze even when the project is profitable overall.

What’s the most important report for a developer to review monthly?

A simple 3-pack works best: (1) project P&L by phase/plot, (2) WIP reconciliation, and (3) a 13-week rolling cash flow forecast that’s updated every month. If those 3 are accurate, you’ll spot problems early.

Can Xero handle property development job costing?

Yes — but only if it’s set up properly. Tracking categories and (where useful) Xero Projects let you split costs and income by project/phase so you can see margins and overspends before it’s too late. Start with Xero Projects and Tracking Categories.

Do I need a specialist property accountant, or will any accountant do?

If you’re developing (rather than just holding property), you’re dealing with WIP, revenue recognition judgement, lender reporting, VAT complexity, and forecast-led cash management. A general accountant can be fine, but a property-focused accountant is far more likely to have the controls and templates ready to go — which saves you time and reduces risk.

Want your development numbers to feel clear (and stay that way)?

If you want help setting up WIP tracking, getting revenue recognition right, and building a cash flow model you can actually trust, speak to the team at Contact us and get your developer finance system working like it should.