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📊 WIP Reporting Guide

Your WIP report tells you if you're actually making money. Learn to read it before your accountant gives you bad news.

The Truth Is in the WIP

Revenue recognition doesn't lie. If your WIP shows fade, you have a problem — even if cash flow looks fine.

What Is a WIP Report?​

WIP (Work in Progress) is how contractors recognize revenue and measure job profitability. Unlike retail businesses that recognize revenue at sale, contractors use percentage-of-completion accounting.

The basic formula:

Revenue Earned = Total Contract Value × Percent Complete

Why WIP Matters​

StakeholderWhy They Care
YouKnow if jobs are profitable
BankLending decisions, covenant compliance
Bonding companyBonding capacity
AccountantFinancial statement accuracy
BuyerCompany valuation (if selling)

Key WIP Concepts​

Percent Complete​

How much of the job is done? Two methods:

Cost-to-Cost Method (Most Common)

% Complete = Costs to Date ÷ Total Estimated Costs

Gross Profit Method

% Complete = Gross Profit Earned ÷ Total Estimated GP

Earned Revenue​

What you've earned based on completion:

Earned Revenue = Contract Value × % Complete

Billings to Date​

What you've actually billed the owner (from pay apps).

Over/Under Billing​

The relationship between earned and billed:

SituationMeaning
OverbilledBilled more than earned (liability)
UnderbilledBilled less than earned (asset)

Reading a WIP Report​

Sample WIP Line​

FieldValue
Contract Value$1,000,000
Estimated Total Cost$850,000
Estimated GP$150,000 (15%)
Costs to Date$425,000
% Complete50%
Earned Revenue$500,000
Billings to Date$550,000
Overbilled$50,000

This job is overbilled by $50,000 — you've billed ahead of where you actually are.

What Over/Underbilling Tells You​

Consistently Overbilled:

  • ✅ Good cash flow management
  • ⚠️ Could indicate front-loading
  • ⚠️ May have cash crunch at closeout

Consistently Underbilled:

  • ❌ Poor cash flow
  • ❌ May indicate billing problems
  • ❌ Financing your owner's project

Large Overbilling:

  • 🚨 Possible job problems hidden
  • 🚨 May have underestimated costs
  • 🚨 Bank/bonding company concern

Cost-to-Complete Analysis​

The most critical WIP input is your Estimated Cost to Complete.

Getting It Right​

Wrong approach: Take budget, subtract costs to date

Right approach: Bottom-up estimate of remaining work

  • What's left to do?
  • What will it cost?
  • Any known problems?
  • Update monthly

Cost Fade​

When estimated total costs increase:

Example:

  • Original estimate: $850,000
  • Month 1: Still $850,000
  • Month 2: Now $880,000
  • Month 3: Now $920,000

This is "fade" — your job is getting worse. Catch it early.

Red Flags​

  • % complete stuck at same level
  • Costs growing faster than progress
  • Estimated GP shrinking monthly
  • Large underbilling appearing

WIP Best Practices​

Monthly Review Process​

  1. Update estimates — Every PM reviews every job
  2. Challenge assumptions — Question unchanged estimates
  3. Document issues — Note risks and contingencies
  4. Review with management — Don't let PMs hide problems
  5. Reconcile to GL — Costs match accounting records

Estimate to Complete Tips​

  • Be honest (optimism doesn't help)
  • Include known change orders
  • Account for punch list and closeout
  • Consider warranty reserves
  • Update for schedule changes

Common Mistakes​

❌ Using budget minus costs — Not a real estimate

❌ Not updating monthly — Stale data is dangerous

❌ PM hiding problems — Culture of honesty required

❌ Ignoring underbillings — Cash flow matters

❌ Forgetting closeout costs — Punch list, documentation, warranty

WIP for Bonding​

Your bonding company reviews WIP to assess:

  • Are jobs profitable?
  • Any problem jobs?
  • Over/underbilling patterns
  • Cost fade trends

What they want to see:

  • Consistent gross profit margins
  • Reasonable over/underbilling
  • No large cost fades
  • Accurate historical estimates

WIP for Banking​

Your bank uses WIP to:

  • Calculate working capital
  • Assess borrowing base
  • Monitor covenant compliance
  • Evaluate credit risk

Key metrics:

  • Underbillings are assets
  • Overbillings are liabilities
  • Net position affects working capital

Schedule of Values vs. WIP​

They're not the same:

SOV %Based on...
Pay app percentWhat you billed
WIP %Based on...
Cost percentWhat you actually spent

If these diverge significantly, you have overbilling/underbilling.

Get Control​

Free Template: Download our WIP report template for Excel.

Track Automatically: BLDR Pro tracks job costs in real-time, so your WIP is always current — no more month-end scrambles to update estimates.